Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRITISH TRANSPORT COMMISSION BILL

As amended, considered; to be read the Third time.

Oral Answers to Questions — EDUCATION

Schools (Frost Damage)

Lieut.-Commander Maydon: asked the Minister of Education what is the estimated total cost of frost damage to schools in the areas of English and Welsh local education authorities during the months of January and February, 1962.

The Minister of Education (Sir David Eccles): Repairs carried out by local education authorities do not require my approval and this information is not available centrally.

Lieut.-Commander Maydon: Could my right hon. Friend give me any estimate of how much this repair work cost in the County of Somerset, and could he say what measures are taken to prevent this recurring and somewhat unnecessary expenditure?

Sir D. Eccles: In the County of Somerset thirteen schools found that their heating installations had been damaged and the cost to repair them was, I think, £2,000. As to the second part of my hon. and gallant Friend's supplementary question, it is part of the standards for school premises Regulations that school buildings should be made proof against frost damage.

Libraries (Working Parties' Reports)

Mr. Worsley: asked the Minister of Education when he expects to receive the reports of the two working parties set

up to study the technical implications of certain of the recommendations of the Roberts Report.

Sir D. Eccles: I received last February the report of the working party on inter-library co-operation, and I hope to receive shortly the report of the working party on the basic requirements for an efficient public library service.

Mr. Worsley: While thanking my right hon. Friend for that reply, may I ask him whether he can give any indication at all when he will act on these reports, because of the feeling of uncertainty in the library service until the decisions are taken?

Sir D. Eccles: I wish that I could answer that, but the fact is, as my hon. Friend knows, that a very large number of local authorities of different sizes are involved, and one has to proceed very carefully.

Correspondence Colleges

Mrs. Slater: asked the Minister of Education if he will take powers to license correspondence colleges so as to enable him to ensure that diplomas issued by them are of true educational value.

The Parliamentary Secretary to the Ministry of Education (Mr. Kenneth Thompson): A Bill to require correspondence colleges to be registered is already before this House and it would not be right for me to anticipate the forthcoming debate upon it.

Mrs. Slater: Yes, but would not the hon. Gentleman agree that something needs doing quickly, some statement, perhaps, if not anticipating the Bill, to prevent some of these colleges issuing false prospectuses misleading people, as some of them do deliberately? As happened in one case quite recently certificates were issued, mainly to colonial people, saying that they had medical value but which were of no use at all, and some even issue statements that they can train public health inspectors, yet when people have undertaken the examinations they find that they are of no use at all without going through the proper channels? Could not the Minister make a statement?

Mr. Thompson: I think that a lot of that would be appropriate for the debate on the Private Member's Bill and that we should wait to see how we get on when that Bill comes before us.

School Building Programme, London

Mr. Lipton: asked the Minister of Education why he has approved only 12 of the 23 schemes submitted by the London County Council for its school building programme in 1963–64.

Sir D. Eccles: I would refer the hon. Member to the reply I gave to the hon. Member for Leicester, North-West (Sir B. Janner) on 19th April.

Mr. Lipton: While thanking the Minister for that reply, does he not consider it quite criminal, at one and the same time, to cut down and split up London's fine educational service? Why should the whole future of scores of thousands of London school children be sacrificed to this Government's vendetta against the L.C.C.? Is the Minister aware that, as far as London is concerned, he is now regarded as education public enemy No. 1?

Sir D. Eccles: That is quite a different question, and if the hon. Gentleman will wait a couple of hours he will get the answer.

Mr. Willey: Is the right hon. Gentleman aware that parents in the Central London area are thoroughly dismayed at the Government's policy, and, further, that the reply to which he referred was thoroughly misleading? Is he also aware that the Government are cutting the school building programme by £9 million compared with the current programme, which in present circumstances is absolutely disastrous?

Sir D. Eccles: I think I gave the full reason on a previous occasion why the school building programme is allocated as it is now, and those reasons really are for the sake of efficient planning.

Mr. Awbery: Is the Minister aware that he is now making it a custom to ask local authorities what are their educational needs for the year, and then cutting those needs by 50 per cent.? What is the use of asking authorities what they need if, every time, the Minister

is going to decide to cut down the figure? Is he aware that it is asking authorities to double their demands so that when the Minister has cut them down the authorities will still get what they need?

Sir D. Eccles: It would be quite easy for me to allocate a total sum to local authorities straight away. But it is much more sensible to ask what they want and then I can compare the priorities of one area with those of another.

Nantwich and Acton Grammar School (Pupil)

Mr. Grant-Ferris: asked the Minister of Education if is aware that a child, particulars of whom have been sent to him by the hon. Member for Nantwich, is compelled to travel long distances at cost to public funds to attend a Cheshire grammar school while a nearby Shropshire grammar school could provide her with suitable education; and if he will discuss with the two education authorities concerned the possibility of transferring the child to the Shropshire school.

Sir D. Eccles: This child was admitted to the Nantwich and Acton Grammar School at the request of her parents and with the agreement of the Cheshire local education authority. I understand that the parents have not asked for their daughter to be moved from this school.

Mr. Grant-Ferris: Is not it important that the best possible use should be made of the child's brain and that she should get a good education? Is not it the case that if she has to travel an inordinate distance to school every day that will prevent her obtaining the best possible education?

Sir D. Eccles: My information is that the child is getting a good education and her parents do not wish her to be moved; nor would the Cheshire authority wish her to go.

Cleethorpes Girls' Grammar School

Sir C. Osborne: asked the Minister of Education, in view of the fact that the Cleethorpes Girls' Grammar School has one of the best examination results in the country, when he expects the


extension work on this school to begin; and if he will give priority to those schools that are most successful.

Sir D. Eccles: I understand that the Lindsey authority has recently approved a project for the Cleethorpes Girls' Grammar School under its minor works programme and that plans will shortly be sent to my Department. It is for the local education authority to decide which projects are to be carried out within its minor works allocation.

Sir C. Osborne: If the plans are being sent to his Department by Lindsey. will my right hon. Friend promise to deal with them quickly and get the work started? Does he not think that schools that have good results ought to be given some reward for those good results?

Sir D. Eccles: I assure my hon. Friend that as soon as the plans come in I will deal with them. Whether examination results are a good criterion for minor works is a matter for argument.

Mr. Lipton: Would not it be a better idea to give priority to those schools which are least successful—

Sir C. Osborne: No.

Mr. Lipton: —because they need the priority most?

Mr. Speaker: Order. The Question is about a particular school said to be very successful, so that that is a different question.

Sir C. Osborne: May I ask Whether my right hon. Friend is aware that this school was built for, I think, 250 girls and that now there are over 500 at the school? Is he aware that it is not minor works nor adjustment that is required but something bigger and better, and that the results obtained surely justify that?

Sir D. Eccles: As soon as the authority submits the plan to me I shall look at it and I hope that I shall be able to approve it at once.

New School, North Sommercotes

Sir C. Osborne: asked the Minister of Education when he expects to give permission for the building of the new school at North Sommercotes, Lincolnshire, which was promised some years ago.

Sir D. Eccles: As soon as the education authority is able to submit a tender within the approved limits.

Sir C. Osborne: Can my right hon. Friend assure the House that the schools in rural districts and the smaller boroughs get as fair a share of what is going as schools in the bigger cities?

Sir D. Eccles: Yes, Sir.

Social Workers (Part-time Courses)

Mr. Coulson: asked the Minister of Education how many part-time day release courses in social work are already in existence at colleges of advanced education; how many new part-time courses are to commence in the autumn of 1962; and at what centres they will be held.

Sir D. Eccles: Several colleges run part-time courses intended for social workers, but no release courses of the type recommended in the Younghusband Report will be available at colleges of further education by the autumn of 1962. My right hon. Friend the Minister of Health and I think that it would be best to give the training council envisaged in the Bill now before Parliament an opportunity to consider what form they should take.

Mr. Coulson: I thank my right hon. Friend for that reply. Is he aware that part-time day release courses of this type are of great benefit to social workers, particularly those employed by local authorities? Would he give careful consideration to drawing the attention of the council to the great need for courses of this sort?

Sir D. Eccles: I will certainly do that.

Craft Apprentice Instructors (Training)

Mr. Albu: asked the Minister of Education, what provision exists in technical colleges for the training of craft apprentice instructors.

Sir D. Eccles: The technical colleges provide some part-time courses for training technical teachers which are open to suitably qualified instructors from industry. Courses more directly designed for craft apprentice instructors


are available outside the colleges, and in particular at the Ministry of Labour Technical Staff College.

Mr. Albu: Is the Minister aware that there is a great shortage of this type of instructor? Does he consider it his responsibility or that of the Minister of Labour to see that the number is increased?

Sir D. Eccles: My right hon. Friend and I work together in this matter.

U.N.E.S.C.O. (United Kingdom National Commission)

Mr. G. M. Thomson: asked the Minister of Education what have been the activities of the United Kingdom National Commission for United Nations Educational, Scientific and Cultural Organisation during the past twelve months.

Sir D. Eccles: The Commission itself has held one meeting during the period and a number of its advisory committees have also met. The dates of meeting are necessarily related to the U.N.E.S.C.O. timetable and the Commission and its committees will be called shortly to discuss the draft programme and budget for 1963–64 which has just been received.

Mr. Thomson: Is not this a very limited amount of activity in this important matter? Will the Minister encourage the Commission to be more active? Will he bear in mind that we are now a signatory to the U.N.E.S.C.O. Convention against discrimination in education? Will he ask the Commission to consider how this may be followed up in the curricula of schools by the teaching of world citizenship and a dislike of any form of discrimination?

Sir D. Eccles: I rely on the Commission which is composed of very distinguished persons. I will consider bringing that point to its notice.

School Building Programme

Mr. Fitch: asked the Minister of Education which local education authorities did not receive any allocation on the 1963–64 building programme.

Sir D. Eccles: Twenty-seven authorities have received no allocation in the 1963–64 educational building programme.

I will, with permission, circulate a list of these in the OFFICIAL REPORT.

Mr. Fitch: Is the Minister aware that the Wigan education authority is one of those mentioned? Will he see that in the next allocation it receives something? Otherwise, how can he expect the children of Wigan to receive a satisfactory education?

Sir D. Eccles: I am aware of that. I also understand that the Wigan authority is reconsidering its proposal to plan to extend the boys' grammar school, and I shall be willing to consider revised proposals if they are put to me.

Mr. Willey: Will the right hon. Gentleman assure the House that at least he will reconsider this part of his cuts in the programme? Can he tell the House what are the architectural staffs of these authorities whose allocations are completely destroyed.

Sir D. Eccles: There are always some authorities which have no programme. Indeed, there is one authority which did not even ask for one.

Following is the information:


England:


Barnsley.
Isles of Scilly.


Barrow-in-Furness.
Lincoln.


Bolton.
Lines. Kesteven.


Bury.
Plymouth.


Doncaster.
Reading


Dudley.
Rotherham.


Great Yarmouth.
Smethwick.


Hastings.
Southport.


Isle of Ely.
Wigan


Isle of Wight.



Wales:


Anglesey.
Merionethshire.


Breconshire.
Montgomeryshire.


Caernarvonshire-
Pembrokeshire.


Carmarthenshire.
Radnorshire.

Mr. Fitch: asked the Minister of Education when he expects to announce the 1964–65 educational building programme.

Sir D. Eccles: When this year's review of public investment has been completed.

Mr. Fitch: Would not the Minister agree that that is a thoroughly unsatisfactory reply? Surely he must agree that if local authorities are to plan ahead, they must know as soon as possible how much money is to be allocated


to them? I realise, of course, in view of the see-saw policy of the Government, that it is possibly very difficult, but surely the Minister should help those authorities by announcing their allocations as soon as possible?

Sir D. Eccles: I agree that it is good and efficient planning to give plenty of time. I hope that this review of public investment will be completed in the late summer or early autumn and thereafter I shall be able to announce the school proportion of it.

Mr. Swingler: asked the Minister of Education if he will request the local authorities to re-submit their school building proposals for 1963–64, including only those projects which are immediately necessary to maintain or achieve minimum contemporary standards; and if he will reconsider the programme on the basis of their submissions.

Sir D. Eccles: No, Sir. The 1963–64 school building programme is the fourth of the five annual programmes based on the Government's policy set out in the White Paper of December, 1958, and Circular 342. I asked authorities to submit their proposals within the terms of that policy. The most urgently needed projects have been included in the programme and there are no grounds for holding up authorities by asking them to proceed as the hon. Member suggests.

Mr. Swingler: In view of the fact that the Minister alleges that most of the local authorities put forward inflated demands, and in view of the allegations and counter-allegations about whether authorities are realistic in their assessment of new school needs, could not the Minister resolve this question by asking local authorities whether they would submit realistic assessments of what is immediately necessary so that we can judge this question?

Sir D. Eccles: That has to come out of an examination of each authority's programme separately, which is exactly what we do when we have them.

Mr. Willey: In view of the fact that this programme is completely out of phase with the other years in the five-year programme and there is this colossal reduction of £9 million in the school

building programme, will not the Minister reconsider this matter with the local authorities and then go back to the Treasury?

Sir D. Eccles: The 1963–64 programme brings the total of the first four years of the five-year programme to exactly £240 million, or four-fifths.

Mr. Swingler: How can an assessment of the real school building needs of the authorities come out of the existing figures in the hands of the Ministry? Does the Minister recall that on 19th April he himself said:
It is remarkable how some local authorities, even within a single county, are realistic while others are totally unrealistic."—[OFFICIAL REPORT, 19th April, 1962; Vol. 658, c. 679.]
Will he ask the local authorities specifically to submit only their realistic estimates of what is required for the next year so that we, Members of Parliament, may judge whether he has granted a proper programme or not?

Sir D. Eccles: What is realistic is a matter for discussion with the authorities. That is exactly what we do.

Mr. Swingler: asked the Minister of Education if he will state, for each of the last five years, the value of the school building programme proposed by the local authorities, the value of the programme he approved and the value of the programme actually carried out.

Sir D. Eccles: As the Answer contain a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Swingler: I thank the Minister for providing his statistics, but is he aware that statistics given by the Treasury a few days ago showed that the total amount of national wealth allocated to education investment has risen by only three-fifths of 1 per cent. in the last five years? Is not this a shocking reflection upon his administration, and ought not he to be fighting in the Cabinet for a much bigger allocation of resources to education in general?

Sir D. Eccles: Three-fifths of 1 per cent., of course, is of a bigger total because the national wealth itself has been increasing, as the figures supplied by my right hon. and learned Friend the


Chancellor of the Exchequer show. I do not think that I need assure the hon. Gentleman that I do the fighting that I can.

Following is the information:


Financial Years
Value of major school building projects proposed
Value of starts authorised by Minister
Actual starts



(£ million)
(£ million)
(£ million)


(1)
(2)
(3)
(4)


1957–58
99
55
53·3


1958–59
106
51
50·4


1959–60
96
46
43·1


1960–61
214*
55
57·2


1961–62
64
66†

The values given are of starts of building work only: site purchases, professional fees, furniture and equipment, which together represent about 30 per cent. of the value of the building work, are excluded.

Notes

* Authorities were asked to make a single submission for the two years 1960–61 and 1961–62.

† This is a provisional figure.

Mr. Willey: asked the Minister of Education whether he will give the values of the school building projects submitted for the school building programme for 1963–64 by each local education authority; and what are the corresponding values of the projects he has approved.

Sir D. Eccles: With permission, I will circulate the figures in the OFFICIAL REPORT.

Mr. Willey: As these figures are appalling, as they reveal cause for dismay and frustration in local education authorities throughout the country, and as the right hon. Gentleman confesses that he has been fighting this matter in the Cabinet, will he now recognise what a failure he has been and that the best course he can take in the interests of education is to resign?

Sir D. Eccles: The education programme is going ahead year by year. We should all like it to be bigger, but a good case could be made for a great many other programmes being bigger. I have to take my turn, but I think that education has a high priority.

Mr. Swingler: Will the Minister, as a small addendum to his figures in the

OFFICIAL REPORT, put a note at the side of the name of each education authority saying whether, in his opinion, the estimates it gave were realistic or totally unrealistic, according to his previous answer?

Sir D. Eccles: No, Sir; but the hon. Gentleman will have a quite shrewd idea by comparing what they got with what they asked for.

Mr. Willey: Does the Minister realise that he has been thoroughly unfair to local education authorities? He destroyed the percentage grant. He is not supporting their building efforts, and now he is preventing them from doing what they want to do.

Following are the figures:


SCHOOL BUILDING PROGRAMME 1963–1964


Estimated costs of projects proposed and projects approved* for English and Welsh Authorities as at 3rdMay, 1962


Local Education Authority
Estimated cost of projects proposed
Estimated cost of projects approved



£'000
£'000


Bedfordshire
1,288
793


Berkshire
1,600
560


Buckinghamshire
1,700
895


Cambridgeshire
370
72


Cheshire
5,500
1,955


Cornwall
499
197


Cumberland
831
209


Derbyshire
1,186
694


Devon
499
436


Dorset
531
122


Durham
6,876
1,700


Essex
3,534
1,868


Gloucestershire
1,041
535


Hampshire
4,000
1,600


Herefordshire
400
177


Hertfordshire
2,500
2,048


Huntingdonshire
657
150


Isle of Ely
279
—


Isle of Wight
158
—


Isles of Scilly
—
—


Kent
2,370
1,300


Lancashire
4,000
3,243


Leicestershire
1,526
309


Lincs.—Holland
268
125


Lincs.—Kesteven
533
—


Lincs.—Lindsey
284
129


Middlesex
4,202
1,350


Norfolk
1,914
209


Northamptonshire
704
486


Northumberland
2,199
612


Nottinghamshire
1,238
688


Oxfordshire
464
166


Peterborough Joint Education Board
233
177


Rutland
38
35


Shropshire
635
269


Somerset
703
478


Staffordshire
3,400
1,300






Local Education Authority
Estimated cost of projects proposed
Estimated cost of projects approved



£'000
£'000


Suffolk, East
557
86


Suffolk, West
305
215


Surrey
3,250
1,266


Sussex, East
461
318


Sussex, West
701
483


Warwickshire
1,500
839


Westmorland
113
55


Wiltshire
1,000
855


Worcestershire
669
314


Yorks, East Riding
225
214


Yorks, North Riding
700
326


Yorks, West Riding
4,000
1,400


London
3,300
1,750


Barnsley
286
—


Barrow-in-Furness
116
—


Bath
213
43


Birkenhead
388
213


Birmingham
3,000
1,368


Blackburn
465
217


Blackpool
869
262


Bolton
467
—


Bootle
170
55


Bournemouth
579
—


Bradford
1,158
340


Brighton
309
146


Bristol
1,233
241


Burnley
130
130


Burton-on-Trent
217
217


Bury
353
—


Canterbury
217
203


Carlisle
934
195


Chester
341
49


Coventry
791
434


Croydon
489
217


Darlington
126
49


Derby
947
57


Dewsbury
275
55


Doncaster
325
—


Dudley
171
—


Eastbourne
54
49


East Ham
216
39


Exeter
67
—


Gateshead
372
—


Gloucester
363
111


Great Yarmouth
177
—


Grimsby
795
143


Halifax
43
43


Hastings
120
—


Huddersfield
470
—


Ipswich
654
133


Kingston upon Hull
922
370


Leeds
1,092
319


Leicester
516
116


Lincoln
908
—


Liverpool
4,500
758


Manchester
3,311
1,060


Middlesbrough
560
112


Newcastle upon Tyne
1,405
659


Northampton
283
80


Norwich
235
235


Nottingham
505
183


Oldham
235
235


Oxford
333
230


Plymouth
287
—


Portsmouth
278
79


Preston
328
37


Reading
282
—


Rochdale
337
—





Local Education Authority
Estimated cost of projects proposed
Estimated cost of projects approved



£'000
£'000


Rotherham
251
—


St. Helens
424
55


Salford
286
85


Sheffield
956
284


Smethwick
255
—


Southampton
115
55


Southend-on-Sea
479
217


Southport
297
—


South Shields
424
—


Stockport
299
183


Stoke-on-Trent
1,156
175


Sunderland
980
49


Tynemouth
43
43


Wakefield
233
49


Wallasey
267
121


Walsall
906
165


Warrington
413
38


West Bromwich
532
201


West Ham
389
110


West Hartlepool
426
275


Wigan
221
—


Wolverhampton
408
—


Worcester
460
55


York
365
121


Anglesey
63
—


Breconshire
257
—


Caernarvonshire
324
—


Cardiganshire
120
99


Carmarthenshire
483
—


Denbighshire
656
110


Flintshire
310
124


Glamorgan
1,881
674


Merioneth
154
—


Monmouthshire
658
392


Montgomeryshire
145
—


Pembrokeshire
473
—


Radnorshire
64
—


Cardiff
885
441


Merthyr Tydfil
699
146


Newport (Mon.)
613
205


Swansea
564
294


TOTAL
127,500
47,256


*EXPLANATORY NOTE

The total value of projects shown in the third Column is £47m. Starts in 1963–64 will total £55m. The difference is due to a number of factors: the details of all authorities' programmes are not yet finally settled; estimates of costs of a number of projects included in the programmes are not yet available; and authorisations for earlier programmes have allowed for the fact that not all work authorised will start in the year in question.

European Languages

Mr. Ridley: asked the Minister of Education what further arrangements he is making for teaching more European languages in schools in view of the possibility of the United Kingdom joining the European Economic Community.

Sir D. Eccles: In reply to my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) on 30th November, 1961, I gave information about progress in this important matter. I have now asked the Curriculum Study Group in my Department to advise me on ways in which language teaching might be further developed.

Mr. Ridley: Would not my right hon. Friend agree that we are one of the most insular nations from the point of view of learning foreign languages? Would not he further agree that if we are to join with Europe it is essential that we should be able to understand more of what is said on the Continent? Will he give consideration to pursuing this matter in his Department and announce plans in the near future?

Sir D. Eccles: I will certainly do that. But of course it has been the tradition that other people learn English which has handicapped us to some extent.

Mr. Shinwell: Would not it be an excellent idea to attempt to teach some of the right hon. Gentleman's hon. Friends on the back benches opposite something more of the provisions of the Rome Treaty and the adverse repercussions on our economy if we enter the Common Market?

Sir D. Eccles: I cannot agree. I think that great opportunities would open up.

Mr. Rankin: Are we going in?

Teachers (Oversize Classes)

Mr. Willey: asked the Minister of Education how many additional teachers will be required to eliminate oversize classes in maintained and assisted schools by 1970, for junior pupils and for senior pupils, respectively.

Sir D. Eccles: The National Advisory Council on the Training and Supply of Teachers has recently estimated that a total of 363,000 teachers will be needed in 1970 to eliminate oversize classes in primary and secondary schools compared with a total of about 274,000 employed at present. These figures cover only full-time qualified teachers and make no allowance for part-time or unqualified teachers. I hope that the hon. Member will await the report, which should be published this month, for full details.

Mr. Willey: I await that report with a good deal of apprehension. Is it not quite clear that the estimates made by the Minister's Department a couple of years ago are being revealed now as over-optimistic and that there is now a crisis? Is not the acute shortage of teachers facing us now a condemnation of the Government's policy, and ought we not to tackle the problem of teacher supply on an entirely new basis and have a crash programme to get the teachers we need at least by 1970?

Sir D. Eccles: It is a little unfair to condemn the Government for an increase in the birth rate.

Mrs. Slater: Will this estimate include reducing the size of primary school classes to 40 and secondary modern school classes to 30, or is any estimate being made to reduce even primary classes to below 40?

Sir D. Eccles: No; this estimate is based upon the present statutory limits.

Mr. Willey: The present birthrate is known. Is the Minister aware that, on today's figures, the proportion of oversize classes is greater than it was before the war?

Sir D. Eccles: Also, there are over 2 million more children in the schools.

Oral Answers to Questions — LOCAL GOVERNMENT

Water Supplies, Greater London Area

Mrs. Butler: asked the Minister of Housing and Local Government and Minister for Welsh Affairs what arrangements he is making to ensure that the provision of an adequate supply of pure water in the Greater London area is not jeopardised during the period of transference of responsibility from the Metropolitan Water Board to the proposed Greater London Authority.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Geoffrey Rippon): The transfer of responsibility for water supply from one authority to another has taken place recently in many parts of the country without any deterioration in the service to consumers. My right hon. Friend is confident that this will be achieved in London if his proposal to


transfer responsibility from the Metropolitan Water Board to the Greater London Council is put into effect.

Mrs. Butler: Bearing in mind the importance of a pure water supply in a vast conurbation like London, may I ask whether the hon. Gentleman has appreciated that more than just a change of administrative responsibility is involved and that there is a seriously unsettling effect on the staffs which may impair the technical efficiency of the service if it continues? Is it not true that the reorganisation to which he refers as taking place in other parts of the country is to bring water authorities into line with the present organisation of the Metropolitan Water Board?

Mr. Rippon: I am sure that there will be no effect on the purity of the water supply. Matters such as transfers of staff and premises will, of course, have to be gone into in detail in the usual way, in exactly the same way as in the rest of the country.

Mr. M. Stewart: But the Metropolitan Water Board is not the only water supplier in London. If the transfer is to be carried through at all, would it not be wiser to transfer to the proposed Greater London Council all the water suppliers in its area?

Mr. Rippon: I am sure that my right lion. Friend will bear that proposal in mind.

Cement Works (Dust)

Mr. Sydney Irving: asked the Minister of Housing and Local Government and Minister for Welsh Affairs what steps he is taking to ensure that the nuisance caused by the pollution of the atmosphere by dust from cement works is brought to an end.

Mr. Rippon: All new kilns are provided with the most modern and efficient equipment for dust arrestment. The number of older kilns not so provided is steadily falling. Complete freedom from nuisance is unfortunately not yet practicable in areas of very concentrated production.

Mr. Irving: Is the Parliamentary Secretary aware of the mounting anger and frustration among people in northwest Kent because of the seriously worsening conditions in that area this

winter? Does he know that there have been four large fall-outs? Not only have they been more frequent but they have been accompanied by a pungent and odious smell. Since it has been recently announced that the Associated Portland Cement Manufacturers have increased their earnings by £2 million this year, is the hon. Gentleman satisfied that enough money is being spent on research and development in getting rid of this menace?

Mr. Rippon: I think that enough money is being spent on research and development. The hon. Gentleman might look at the 1960 annual report on alkali works, which gives a good deal of information. I agree that in at least two of those works—the two nearest Dartford, the Kent and Johnson works—there have been particular difficulties recently. These were due to the use of clay with a high alkali content. The company concerned is now applying for planning permission to get clay of a better quality. I hope that that will result in an improvement.

Mrs. Slater: This problem is not peculiar to Kent. We have it in my constituency. There is great reluctance on the part of manufacturers to install machinery which would lessen this great nuisance to many householders who live very near to the factory. Will the hon. Gentleman ask his Alkali Inspectorate to be very much more firm than it is being at present?

Mr. Rippon: The difficulty is that we have been pioneers in this sphere. Some of our electrostatic precipitation machinery is not as up to date and modern as one would wish, but this problem is being progressively dealt with. Certainly our Chief Alkali Inspector and his officials are looking into it very closely.

Public Lavatories (Turnstiles)

Mrs. Castle: asked the Minister of Housing and Local Government and Minister for Welsh Affairs how many local authorities have removed the turnstiles from their public lavatories following the issue of his recent circular requesting them to do so; how many turnstiles still remain; and when he anticipates they will all be removed.

Mr. Rippon: My right hon. Friend regrets that comprehensive figures are not available at present, but he will shortly be asking local authorities what action they have taken on the circular.

Mrs. Castle: Is the hon. Gentleman aware that I regularly receive letters complaining that these turnstiles are still in position? I received one only the other day complaining of a particularly vicious one at Penmaenmawr. Will not the hon. Gentleman issue another circular immediately to local authorities instructing them to open the gates at these turnstiles pending the completion of work to remove the structures completely?

Mr. Rippon: A large number of authorities have taken action. At least ten authorities which bought and proposed to install them are not going to do so. Four authorities—Blackpool, Clacton, Liskeard and Looe—are still maintaining what I might call a lockout, but we are in communication with them. We will certainly take action fairly shortly to make sure that the others are brought into line.

Circular 14/62

Mr. Peyton: asked the Minister of Housing and Local Government and Minister for Welsh Affairs What is meant by the word "premiated" as used in paragraph 5 of his Department's circular number 14/62; and if he will give an assurance that it will not be used again.

Mr. Rippon: Premiated schemes are schemes for which prizes have been awarded. I note my hon. Friend's dislike of this venerable word.

Mr. Peyton: Would my hon. Friend be altogether surprised if I were to say that I do not feel greatly premiated by that Answer? Will he try to put about the quite novel and revolutionary idea that these circulars are meant to impart information and are not an exercise in unseen translation? To revert to words described in the dictionary as being of 1547 vintage is not the way the Government should address people. They should make their meaning clear.

Mr. Rippon: It is unfair to suggest that this word is of 1547 vintage. I have traced the use of it as recently as 1892 in an article in the Athenaeum.

Mr. Peyton: Perhaps my hon. Friend would be good enough to look up the larger Oxford English Dictionary—foe might even consult the editors—because there its use is described as "very rare". Will he bear in mind that it is desirable to impart information and not to conceal meanings?

Mr. Rippon: I think that it would be a tragedy if we exorcised from the English dictionary a word used by Western Europeans, including Boccaccio, for milennia. In making this suggestion, my hon. Friend does not do justice to the education establishment which he attended. However, if he feels strongly about it, I assure him that we shall try to decant it from some of the housing circulars dealing with obsolescence.

Mr. M. Stewart: If "premiated" means someone to whom a prize is awarded, is the hon. Gentleman aware that he and his colleagues are the most dispremiated people in the country?

Mr. Rippon: I do not think I will award the hon. Gentleman a prize for that one.

New Town, Dawley

Mr. V. Yates: asked the Minister of Housing and Local Government and Minister for Welsh Affairs if he has considered the report on the proposed new town at Dawley; and if he will now make a statement.

Mr. Rippon: My right hon. Friend expects to make a statement shortly.

Mr. V. Yates: We have heard that reply for a long time. Is the hon. Gentleman aware that his predecessor agreed to the principle of a new town almost a year ago? Two months after refusing Birmingham the right to build on land at Wythall, we are still without any prospect or any hope. We need 77,000 houses to meet the problem. How long must we wait for the Minister to do something about this matter?

Mr. Rippon: I fully appreciate that this is a very urgent matter. I assure the hon. Gentleman that he will not hear this Answer very often again. We expect a decision before very long.

Mr. W. Yates: I hope my hon. Friend is telling the truth about this. Is it true


that no announcement will be made until the Government have had time to review the planning of local authority areas, which will not take place until next October? Is my hon. Friend aware that this delay is quite intolerable and deplorable and very unfair on the local authorities in the area? Will he, therefore, give the House an assurance that the Minister will make a statement before the Whitsun Recess?

Mr. Rippon: All I can say is that my right hon. Friend will make a statement very soon.

Civil Defence (Dispersal Plans)

Mr. Emrys Hughes: asked the Minister of Housing and Local Government and Minister for Welsh Affairs to what extent, when making plans for the dispersal of sections of the population in the event of the danger of nuclear war, he takes into consideration the possibility that the evacuation of nine and a half million people at short notice would disorganise transport and result in additional danger to the population that is to be dispersed.

Mr. Rippon: Plans for dispersal will take into account the likely availability of public transport for home defence measures in an emergency. It would be for the Government to balance in the circumstances of the time the advantages and disadvantages of offering dispersal arrangements to members of the priority classes.

Mr. Hughes: Does the Minister think that it is time that the House was more fully informed about the question of the dispersal of the civilian population? Is he aware that there has been wide criticism of this scheme on the ground that it is hopelessly impracticable and a cruel fraud on the civilian population? In view of the fact that we have not had a civil defence debate for five years, when wild the Minister take some opportunity to make a fuller statement?

Mr. Rippon: I cannot order the business of the House for the hon. Gentleman. I cannot add anything to what is in Circular 15/62, issued on 28th March.

Mr. Hughes: In view of the unsatisfactory nature of that Answer, I beg to give notice that I will raise the matter at the earliest possible opportunity.

Fish Market, Liverpool (Private Inquiry)

Mrs. Braddock: asked the Minister of Housing and Local Government and Minister for Welsh Affairs how many objections he has received to the placing of a fish market on a previous housing site in the central area of Liverpool, Victoria Square; and what action he intends to take in the matter.

Mr. Rippon: My right hon. Friend has received eighteen objections signed by a total of over 2,000 people. He has decided to hold a public local inquiry.

Mrs. Braddock: Is the Parliamentary Secretary aware that people in the area will be very pleased indeed to attend the inquiry and to show their disgust at the attitude adopted by the Liverpool Corporation in handing over land, which was used for housing, on which to put a fish market in the midst of a housing area?

Mr. Rippon: I cannot anticipate the result of the inquiry, and I do not think that it should be prejudged in the way that the hon. Lady has done.

Oral Answers to Questions — HOUSING

West Kentish Town (Redevelopment)

Mr. K. Robinson: asked the Minister of Housing and Local Government and Minister for Welsh Affairs to what extent, when giving loan sanction to St. Pancras Borough Council for the redevelopment of West Kentish Town by Reema Construction Ltd., he studied the design aspects of the proposal; and whether he required or suggested any modifications of the scheme as submitted, or made any other comments.

Mr. Rippon: The scheme was designed by a private architect appointed by the borough council and received planning approval from the London County Council. The accommodation provided met our technical standards. One suggested modification was adopted which reduced the cost.

Mr. Robinson: Is the hon. Gentleman aware that this is just about the most hideous development in housing in London since the war, and that, what


is worse, it supplants a most imaginative scheme prepared by Sir Leslie Martin for the previous Labour-controlled council? Is the hon. Gentleman saying that the Minister of Housing and Local Government can do nothing to protect Londoners from having old slums replaced by new slums?

Mr. Rippon: The quality of design is obviously a matter of opinion. Here, a qualified architect was appointed. The plans were approved by the London County Council, and my right hon. Friend saw no reason to interfere with its judgment.

Mr. K. Robinson: asked the Minister of Housing and Local Government and Minister for Welsh Affairs why, before granting loan sanction to St. Pancras Borough Council for the redevelopment of West Kentish Town now in progress, he did not require the Council to obtain competitive tenders.

Mr. Rippon: The council's proposals were for a prefabricated type of construction for which competitive tendering was not appropriate. Since it had previously had satisfactory experience of this method and since the cost was reasonable, my right hon. Friend's predecessor saw no reason to ask the council to alter its proposals.

Mr. Robinson: Is the hon. Gentleman saying that he has no power to prevent ratepayers' money being squandered in this way? Does he know that this development is now costing at least as much as, if not more than, a normal architect-designed development?

Mr. Rippon: The point is that the council is perfectly entitled to suspend its standing orders in circumstances of this kind. Clearly, where one is dealing with a special prefabricated type of construction, competitive tendering may be quite inappropriate.

Local Authority Proposals

Mr. Spriggs: asked the Minister of Housing and Local Government and Minister for Welsh Affairs what proposals he has received from local government authorities and other associated bodies for amending legislation intended to speed up housing and rehousing for those people on waiting lists throughout the country.

Mr. Rippon: My right hon. Friend cannot trace receipt of any recent proposals of this kind.

Mr. Spriggs: I wonder whether the hon. Gentleman will accept a proposal from me? If he would cut the interest rates charged to local authorities for housing and other local government work, the housing shortage would rapidly be over.

Mr. Rippon: I do not accept that proposition.

Mr. A. Lewis: Is the hon. Gentleman aware that his reply is somewhat misleading? The County Borough of West Ham submitted to him a proposal that councils should have the right to convert houses for those on their waiting lists and should get a housing subsidy for it. It asked the Minister whether he would consider introducing such a scheme as a means of helping to remove people's names from the waiting lists. Will not he look again at this proposal to see whether a housing subsidy can be given to local authorities to take over and convert and modernise some of these houses?

Mr. Rippon: If we have overlooked that proposal which is regarded as a means of speeding up housing, my right hon. Friend will no doubt bear it in mind. I cannot hold out much hope of amending legislation of that character.

Furnished Premises (Rents)

Mr. V. Yates: asked the Minister of Housing and Local Government and Minister for Welsh Affairs whether he is aware that considerable hardship is being caused to persons occupying furnished premises by landlords who are charging excessive rents, and serving notice to quit on tenants, which prevents them from getting relief by applying to rent tribunals; and whether he will introduce legislation to remedy the position.

Mr. Rippon: No, Sir.

Mr. Yates: Is the hon. Gentleman aware that in one case—I have verified these facts—a man was put into a furnished five-roomed semi-slum house and charged £12 a week which was increased to £14 a week after he had paid that rent


for six weeks? The notice to quit expired before he could get any satisfaction from the rent tribunal. Should not a man be able to claim rent retrospectively when a court finds that he has to pay £188 arrears of rent? This is an absolute disgrace.

Mr. Rippon: If the hon. Gentleman is referring to a case about which he wrote to my right hon. Friend, I do not think he has presented it very fairly. The man agreed to pay a rent of £12. He fell into arrears. The court gave him possession. The Birmingham City Council looked into the circumstances of the case, decided that it had no merit and proposed to take no further action. The law in this matter stems from an Act passed by the Labour Government, the Furnished Houses (Rent Control) Act, 1946, which was continued last year after a very happy debate which went on until about five o'clock in the morning.

Sir B. Janner: Will the hon. Gentleman reconsider the matter? Is he aware that, when a landlord ascertains that a tenant is discontented with the amount of rent he is paying for a furnished fiat, he immediately presents that tenant with a notice preventing him from going to the rent tribunal to have the matter put right? As I understand, that is what my hon. Friend is driving at. In view of experience—never mind when the Act came into force—does not the hon. Gentleman think it time to reconsider the matter to see whether this is justified, or whether injustice is being done to a large number of tenants?

Mr. Rippon: Of course, these matters can always be considered again, but I do not think it unreasonable that we should prevent a man, after notice to quit has been served, from going to the rent tribunal. If he goes to the rent tribunal, it can fix a rent even though it cannot give him rent protection. That binds the property in future. If the man goes straight away after making his bargain and before a notice to quit, he can get three months security of tenure, and he can, if necessary, get it again and again.

Mr. Yates: The Minister sent me a letter yesterday saying that the man had agreed to pay £9 a week. He tells me this afternoon—

Mr. Speaker: Order. This is Question Time, not the time to make speeches.

Mr. Rippon: He originally paid £9 a week. He had a very heavy electric light bill. The landlord approached him and he agreed to pay £12 a week. I am sorry if I have foreshortened it, but it is difficult to give the whole story in answer to a Question.

Subsidies

Mr. Frank Allaun: asked the Minister of Housing and Local Government and Minister for Welsh Affairs which local authorities will have their housing subsidies reduced from £22 to £8 per house per annum; and which will have them increased to £24.

Mr. Rippon: My right hon. Friend is not in a position to give this information, as the relevant financial details which will determine the amount of subsidy payable to each individual authority are not yet available.

Mr. Allaun: Is it not a fact that cities with such terrible housing problems as in Newcastle and Liverpool will go down to the £8 a year subsidy whereas places like Bournemouth will go up? Is it not also a fact that even if the subsidy were raised to £50 a year it would still not cover the extra burden imposed by the Government's higher interest rates?

Mr. Rippon: I think that we discussed this fairly fully yesterday. My right hon. Friend explained how the subsidy could move up from £8 to £24, or even to £40, and showed that an authority extending its slum clearance programme, which is what we want it to do, would very often be able to get the higher subsidy.

Mr. Fernyhough: Is the Parliamentary Secretary aware that, although some local authorities want to expand slum clearance programmes, they are not getting the necessary go-ahead signal from the Minister and that the Minister himself is cutting them down?

Mr. Rippon: As with education, we have to consider what is put forward and what is allowed in relation to what can be done.

Oral Answers to Questions — PRIME MINISTER, PRESIDENT KENNEDY AND PRIME MINISTER OF CANADA (TALKS)

Mr. Emrys Hughes: asked the Prime Minister if he will make a statement on his recent official talks with President Kennedy.

Mr. A. Henderson: asked the Prime Minister if he will make a statement on his recent discussions with President Kennedy.

Dame Irene Ward: asked the Prime Minister whether he received satisfactory assurances from President Kennedy on the subject of flag discrimination against British shipping during his recent talks with the President.

Mr. Frank Allaun: asked the Prime Minister if he will make a statement on his discussion with President Kennedy about nuclear test explosions and Germany.

Mr. Hector Hughes: asked the Prime Minister (1) if he will make a statement on his conversations last week with Mr. Kennedy, indicating the topics discussed, the agreements reached and the matters upon which they failed to agree;

(2) if he will make a statement on his conversations last week with the Prime Minister of Canada, indicating the topics discussed, the agreements reached and the matters on which they failed to agree.

Mr. Rankin: asked the Prime Minister if he will make a statement on his recent talks with the Prime Minister of Canada.

The Prime Minister (Mr. Harold Macmillan): I would refer hon. Members to the joint communiqués issued in Washington and Ottawa following the talks. I am arranging for these to be circulated in the OFFICIAL REPORT. Since the talks were confidential I do not think it would be right for me to enter into particulars in more detail than the communiqués provide, but the House will have seen that my discussions with the President and the Prime Minister of Canada covered a wide range of topics.

Mr. Emrys Hughes: Is the Prime Minister aware that these communiqués consisted of nebulous platitudes Which did not satisfy anyone aware of the danger resulting from these tests at Christmas Island? Can he tell us whether at any time he tried to impress on President Kennedy the danger of these tests and the feeling throughout the world against them? Can he also tell us Whether he tried to gat a summit meeting and whether President Kennedy refused to agree to it?

The Prime Minister: With regard to the first part of the supplementary question as I told the House immediately before we rose for the Easter Recess, I did not think it right that I should press President Kennedy to defer the present series of nuclear tests in the face of the refusal of the Soviet Government to accept even the principle of international verification. At the same time, we made it clear that we shall continue to work for progress towards disarmament, including agreement for the ending of nuclear tests. With regard to the second part of the supplementary question, I think that was dealt with in the communiqué. I have often said in this House, and I repeat it, that meetings, Whether between two, three or four Heads of Governments can be useful. Other meetings can be useful. I do not rule out anything, but I do not wish at this moment to make any more precise statement.

Mr. A. Henderson: In view of the relative unimportance of underground tests, why cannot the United States Government and the British Government renew their September offer to ban all atmospheric tests provided that the Soviet Government agree to international on-site verification in case of doubt or dispute?

The Prime Minister: In the first place, we made that offer. It was very strongly rejected by the Soviet Government, who continued their tests. On the second part, even with this there is the point that they may refuse any form of verification. We shall not, however, abandon hope, and we shall make every effort to see whether, in due course, we can reach an agreement for the abandoning of all tests.

Dame Irene Ward: In congratulating my right hon. Friend on the success of his journey to the United States and thanking him particularly for having raised the question of shipping problems, which will be very welcome to the shipping and shipbuilding areas of this country, may I ask him whether, as he was reported to have said something to President Kennedy on this matter, he thinks President Kennedy could deal with the shipping lobby in the way that he has dealt with the steel barons?

The Prime Minister: I think that part of the supplementary question should be referred to the President. With regard to the remainder we had a discussion and I made it clear, and I propose to follow it up, that I would continue to press these matters in further detail.

Mr. Allaun: Regarding the forthcoming 500-milas-high test, did the Prime Minister ask Mr. Kennedy if the American scientists were quite certain of the effects and that there would be no unforeseen consequences? Secondly, were the Prime Minister and Mr. Kennedy aware that as these thirty tests continue throughout the summer, there will be increasing protests against them in this country and throughout the world?

The Prime Minister: This is, of course, a complicated scientific problem. In regard to fall-out, from the highest altitudes the fall-out will be correspondingly reduced. Nor is this an altogether novel test. High altitude nuclear tests were carried out by the United States in 1958. This test is being mounted from Johnson Island, in American territory.

Mr. Rankin: In the conversations with the Canadian Prime Minister, did Mr. Diefenbaker impress upon the Prime Minister the serious losses that would accrue to Canadian exports in the event of our entry into the Common Market? I believe that they are expected to diminish by 13 or 14 per cent. Does the right hon. Gentleman regard it as good business to prejudice our huge Commonwealth trade in favour of problematical gains in Europe which would not make up for our Commonwealth losses?

The Prime Minister: All these questions were fully discussed between us and have been discussed on many occasions.

I repeated what has been said publicly—the position of Her Majesty's Government in this matter.

Mr. Biggs-Davison: Without asking the Prime Minister to disclose any confidential discussions, may I ask whether he is aware that many people in this country and throughout the Commonwealth hope that, while we strive for European unity, it was made quite clear to President Kennedy that we are not ready to surrender the preferential arrangements with our Commonwealth partners?

The Prime Minister: Our position with regard to this matter was made quite clear to the United States Government and the undertakings which we have already made in public were repeated by me and impressed upon the President. There are, of course, many aspects of this matter, but the question has been explained over and over again. What we have surely now to do is to conduct the negotiation and then reach a judgment.

Mr. Gaitskell: May I ask the Prime Minister two questions about the nuclear test issue? Can he say whether, in his discussions with President Kennedy, there was any idea of a fresh approach to the Russians or that any new proposals would be put forward by the West in the talks which, I am glad to see, are to continue? Secondly, has the Prime Minister seen the interchange which took place at Question Time on Tuesday between the Home Secretary and various hon. Members? Can he throw rather more light on the question of fall-out from the American tests? The Home Secretary referred to the Prime Minister a number of Questions and the House would be glad to have an answer to them.

The Prime Minister: With regard to the second part of that supplementary question, perhaps the right hon. Gentleman would excuse me. I got back rather late, only just in time for the Cabinet. If I could have a detailed Question on that, I will make sure that these scientific matters are looked at carefully before answering. With regard to the first part of the supplementary question, we hope to continue negotiations in Geneva. The President and I


will make every effort to reach a satisfactory conclusion. As for the future, I know that he and I are both determined to do everything we can in due course to bring this to an end.

Mr. Gaitskell: One further supplementary question arises from that second point. What is the attitude of the British and American Governments now towards the proposals put forward by the neutrals? Are they completely in abeyance, or will they be further discussed at Geneva?

The Prime Minister: I understand that they are being, or will be, discussed at Geneva. As, however, the right hon. Gentleman knows, there is up to now the very difficult question of whatever may be the instruments to make what I call the prima facie case, what is to be the method of verification on the spot.

Mr. Grimond: The Prime Minister has been reported as saying in Canada something to the effect that the Six should make it easier for us to enter the Common Market. As this was a public statement, can the Prime Minister tell us a little more of what was in his mind when he said it?

The Prime Minister: I said that I thought a very great responsibility lay upon the British Government. I thought that an equal responsibility laid upon the Governments of the European countries and I hoped that they would do everything they could to ease our position. I had in mind our commitments, already well known, to the Commonwealth and our agricultural problems at home. The point I was trying to make was that, whatever the final conclusion, for good of for ill, it would have a great effect upon the future both of Europe, the Commonwealth and, indeed, the whole free world.

Mr. Shinwell: When the Prime Minister suggested that the Six should make it easier for us, did he mean that we had run up against difficulties in the negotiations? If so, what are those difficulties?

The Prime Minister: No, Sir. I was making an appeal in public which I would be glad to make in private and have made over the years to the Heads of these Governments. I am sure that

they will respond to it and in the negotiations will see our difficulties as well as that we are trying to meet their problems. If the negotiation is to succeed, it must be entered into in that spirit, and I believe that it will.

Following are the joint communiqués:

OFFICE OF THE WHITE HOUSE PRESS SECRETARY AND OFFICE OF THE PRIME MINISTER

THE WHITE HOUSE

Text of Joint Communique by the President and His Excellency, the Prime Minister of the United Kingdom following discussions in Washington, D.C., April 28–29, 1962.

President Kennedy and Prime Minister Macmillan have undertaken in Washington during the past day a continuation of the series of discussions which they began in Key West last year. They have conducted a general review of international problems facing their two countries.

In particular, the President and the Prime Minister reviewed the problems of disarmament and of nuclear test control. They reaffirmed their regret that the Soviet Government has not been willing to join in an effective treaty which would end nuclear testing. They expressed the determination of their two Governments to continue to work for progress toward disarmament, including the ending of nuclear tests.

The President gave the Prime Minister an account of the recent discussions between Secretary of State Rusk and Soviet Ambassador Dobrynin. They agreed on the importance of maintaining these and other contacts between East and West. They reaffirmed their willingness to consider meetings of Heads of Government whenever there is an indication that such meetings would serve the interests of peace and understanding and in this respect they took note of the opinion recently expressed by Chairman Khrushchev.

The Prime Minister informed the President of the progress in the Brussels negotiations between Great Britain and the European Economic Community, and explained the importance of preserving the interests of the Commonwealth and EFTA countries. The President and Prime Minister expressed their hopes that these negotiations between the United Kingdom and the EEC would be crowned with success. The President informed the Prime Minister of the progress of proposals for new trade legislation to permit stronger relationships within and beyond the Atlantic Community.

The President and the Prime Minister then reviewed the situation of the NATO alliance in the light of the forthcoming meeting in Athens. They also discussed the situation in South-East Asia, and strongly reaffirmed their support for an independent and neutral Laos under a government committed to that


objective. They discussed problems of mutual commercial interest, including questions of shipping policy, tariffs and commodity problems. The President informed the Prime Minister of the developing efforts of the Western Hemisphere through the Alliance for Progress and explained his concern for the maintenance and development of adequate market opportunities for the products of the Latin American countries.

OFFICE OF THE CANADIAN PRIME MINISTER

May 1, 1962

During the past two days Prime Minister Macmillan and Prime Minister Diefenbaker have held meetings in Ottawa at which they have reviewed international questions of common concern to the United Kingdom and Canada. These talks were a continuation of the series of meetings which the two Prime Ministers have held from time to time.

In the light of his recent discussion with President Kennedy in Washington, Mr. Macmillan reviewed with Mr. Diefenbaker the present state of East-West relations and the particular problems of Berlin, disarmament, and nuclear tests. They also considered the situation in South-East Asia. The two Prime Ministers noted with regret the present situation concerning nuclear tests but reaffirmed their determination to work both in the Geneva Conference and by any other appropriate means towards the conclusion of effective international agreements for the cessation of nuclear tests and for general and complete disarmament.

Prime Minister Macmillan informed Prime Minister Diefenbaker of the present state of the negotiations in Brussels between the United Kingdom and the European Economic Community and again reaffirmed the United Kingdom's determination to safeguard the essential interests of Commonwealth countries.

Prime Minister Diefenbaker reiterated that the Canadian Government attached the highest importance to the preservation of the interests of Commonwealth countries and said that the Canadian Government was confident that the United Kingdom Government would do its utmost to ensure that in the negotiations with the European Economic Community, Canadian trade interests would be safeguarded.

The two Prime Ministers reaffirmed their intention to keep closely in touch as the negotiations proceed during the coming months and took note that before a final decision was reached, there would be an opportunity for full collective consultation at the Meeting of Commonwealth Prime Ministers to be held in London in September.

The two Prime Ministers reviewed the course of development of the Commonwealth. They strongly reaffirmed their faith in the value of the Commonwealth association and agreed that the strengthening of Commonwealth links remained a common objective of the first importance to both Canada and the United Kingdom.

Oral Answers to Questions — NUCLEAR TESTS

Mr. Driberg: asked the Prime Minister if he has now consulted the President of the United States of America about the possibility of making available to delegates at the Geneva disarmament conference the reports on the monitoring of underground nuclear tests prepared by the United States Coast and Geodetic Survey; and if he will publish these reports, together with other recent scientific data on the detection of tests, as a White Paper.

The Prime Minister: As I have said, my conversations with President Kennedy are confidential.
The report to which the hon. Member refers is also a confidential United States Government document. It could not therefore be published in this country. I do not consider that the publication of a White Paper would be practicable at this stage.

Mr. Driberg: Would the right hon. Gentleman agree that as the processes of detection and identification become more and more exact and reliable, verification becomes less important? Is he aware that these reports, one of which at least, I think, has been released in the United States, although as surreptitiously as possible, indicate that these processes are much more reliable than has been generally put out?

The Prime Minister: I think that the hon. Gentleman meant to state this accurately. Curiously enough, if the instruments are further away in more distant countries, the number of unexplained incidents is likely to rise rather than be diminished. Therefore, identification on the spot may, in the present state of knowledge, become more important and have to take place on a larger number of occasions.

Mr. Mason: Why does the Prime Minister place so much emphasis on verification? Is it not a fact that our instruments for nuclear detection have developed to such an extent that we can detect nearly all explosions, particularly stratospheric, atmospheric and those just above the ground, and that the only ones in doubt are the low-yield tests exploded underground? Would it


not be worth while now to take a risk to get an international test agreement with just those escaping and with the possibility of a second stage later of neutral bodies examining, if necessary, tests of that doubtful nature on verification?

The Prime Minister: That is another point. It is a point as to whether we should try to concentrate, not on having a comprehensive agreement, but on some part of the nuclear testing. On the point of underground tests, as I have tried to explain before, what the instruments do, wherever they are located, whether on American territory, on Russian territory or jointly, is to reveal that an explosion has taken place which is not, or may not be, from the character of the report, of a natural type. In that case, investigation on the spot is necessary.

Mr. S. Silverman: Would the Prime Minister explain what exactly is the relevance of the dispute about underground tests and about verification of them to the explosion of atmospheric tests on the scale and to the number that the United States is now committed? Is it not rather absurd to go on testing where agreement has been reached because there is a small area of the field in which agreement has not been reached? Would the Prime Minister further explain whether there has been any verification whatever of the view of American scientists that no harm is being done by the present series of tests?

The Prime Minister: With regard to the historical account which the hon. Member gives, I must repeat that I think that it is very biassed. For three years we abstained from tests. The Russian Government then made them on a very large scale. We then offered, if we could not get full agreement concerning the underground tests and the whole arrangements for international verification, to have a ban on atmospheric tests. That was refused. There have, therefore, now been the two last great series of tests conducted by the Soviet Government. After the statement I made in November with the President and after the advice which we both received from our scientists, as I told the House quite frankly, I did not feel it right to press, even if I could have done so successfully, against the holding of tests which we believe at this stage to be necessary if

we are to maintain the full value of the deterrent.

Mr. Gaitskell: In all this, is not the real difficulty that it is hard to find a way to ensure that further preparations for tests, atmospheric or underground, are not being made? Was not a large part of the insistence upon the acceptance of verification the desire to have some kind of indication by the Soviet Government that they were prepared to accept international control in disarmament?

The Prime Minister: Yes, Sir. I think that that puts it very fairly. We were very disappointed indeed that after this point, which was granted as long ago as 1959 when we even got to the question of discussing the number of visits, the Russians should now altogether refuse.

Mr. Driberg: With respect, I think that the right hon. Gentleman misunderstood my first supplementary question. Would he at least agree to make inquiries about these reports, to find out whether they do not show that detection and identification even of underground tests—which are less important scientifically than atmospheric tests—are now much more sophisticated than the right hon. Gentleman suggested?

The Prime Minister: I am not saying that. I repeat that what it does is to identify that an explosion has taken place which may not be from natural causes. [An HON. MEMBER: "No."] It does. I have it from many discussions with our scientists on this. I am not saying that the science is all the time advancing. Let us say that it reveals that it is an artificial explosion. What then? Is the treaty then to be repudiated on the ipse dixit of one authority? Surely the only way to confirm the good faith of either side is that there should be at that point verification.

QUESTIONS TO MINISTERS

Mr. Donnelly: On a point of order. May I seek your guidance, Mr. Speaker, on a point on which I apologise that I have not given you notice? Just before Easter the Attorney-General, as you will recall, make a statement in the House about Messrs. Burgess and Maclean, in rather exceptional circumstances,


in response to a Private Notice Question. Since then it has come to my knowledge that the Government are paying sums of money to Burgess and Maclean in Moscow to dwell there. Could the Chancellor of the Exchequer have permission to answer Questions Nos. 40 and 41?

Mr. Speaker: I have had no such request.

Mr. Donnelly: Further to that point of order, Sir. Do I understand that the Chancellor has made no such request?

Mr. Speaker: I said that I had received no such request which, in the context, disposes of the matter for today.

Mr. Nabarro: It was not a point of order, anyway.

BUSINESS OF THE HOUSE

Mr. Gaitskell: May I ask the Leader of the House whether he will state the business of the House for next week?

The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod): Yes, Sir. The business for next week will be as follows:
MONDAY, 7TH MAY—Consideration of private Members' Motions until Seven o'clock.
Report and Third Reading of the Health Visitors and Social Workers Training Bill.
TUESDAY, 8TH MAY—Debate on Central Africa, which will arise on a Government Motion.
WEDNESDAY, 9TH MAY—Second Reading of the Pipe-lines Bill [Lords], and Committee stage of the Money Resolution.

Motion on the Motor Vehicles (International Circulation) (Amendment) Order.

THURSDAY, 10TH MAY—Supply [15th Allotted Day]: Committee.

There will be a debate on Home Office Affairs, which will arise on the appropriate Votes.

FRIDAY, 11TH MAY—Private Members' Motions.

MONDAY, 14TH MAY—The proposed business will be: Supply [16th Allotted Day]: Committee.

A debate will take place on Nurses Pay, on the appropriate Votes.

Mr. Gaitskell: In view of the great importance of the Pipe-lines Bill, which raises all sorts of issues of major principle, may I ask whether the Government are proposing that the Committee stage should be taken on the Floor of the House?

Mr. Macleod: No, Sir. We shall follow the ordinary procedure.

Mr. Gaitskell: Would the right hon. Gentleman look again at this matter? This is a Bill which, of course, has been considered very thoroughly in another place and it is quite obvious from the debates there that it raises issues of the highest importance. Will the right hon. Gentleman look again at this, so that the House as a whole can have a chance of taking part in the Committee stage?

Mr. Macleod: I will, of course, look at it again in response to the right hon. Gentleman's request, but what he says about the importance of the Bill does not alone bring it within the doctrines previously laid down on these matters.

Dame Irene Ward: In view of the fact that in the last debate on nurses' pay I was profoundly dissatisfied with the speeches made by both the Minister of Health and the Secretary of State for Scotland, may I ask whether, now that this is a matter of Government policy and right outside the jurisdiction of the Minister of Health, we can expect the Chancellor of the Exchequer to intervene and give us an opportunity of widening the whole debate so that we can really understand where we are?

Mr. Macleod: I will take note of what my hon. Friend says. The main speech will be made by my right hon. Friend the Minister of Health and we will take into account what is being said in considering the final speech in reply from this side of the House.

Mr. M. Foot: In view of the difficulty, which was further revealed by the questions to the Prime Minister a few minutes ago, of eliciting answers about the supremely important matter of H-bomb tests and neutralist proposals


and the real effect of these tests, and of the fact that these matters cannot be dealt with by question and answer, may I ask whether the Leader of the House will not rearrange the business for next week so that we can have a full debate on these matters before any more of these tests go ahead with Her Majesty's Government's approval?
Is it not absolutely monstrous that the biggest round of tests supported by the West should take place without any debate whatsoever in the House of Commons? Will the right hon. Gentleman take into account that even if he may not have received representations on this matter through official channels there are large numbers of hon. Members who want a debate and who think that it is a scandal that there has not been one?

Mr. Macleod: With respect, the business I have announced for six days includes no fewer than four and a half days for debates and Motions and only one and a half days for ordinary legislation, and included in the four and a half days are two days on which the Opposition have the choice of discussion. [HON. MEMBER: "Which Opposition?] The debate to take place on Tuesday on Central Africa is in Government time. I think that we are having an admirable ration of discussion on most important matters.

Sir H. Legge-Bourke: Could my right hon. Friend say whether in the debate on Thursday, on Home Office affairs, the Votes selected for that day include reference to civil defence?

Mr. Macleod: Yes, Sir. I understand that at the request of the Opposition we will be putting down all the Home Office Votes. Therefore, any matter covered by them could be discussed.

Mr. Driberg: Surely it is the Government's responsibility to find time for debates on the tests for which the Government have assented to the use of Christmas Island. Is not this particularly the case in view of the new announcement about high-altitude tests which is causing grave concern among scientists, including people like Sir Bernard Lovell?

Mr. Macleod: The position is that the Government have consented to these

tests, and if the House wishes to criticise the Government for doing that there are ways in which it can be done. But we do not feel that it is necessary for us to seek the support of the House. We are confident that we have it on this issue.

Mr. Nabarro: Has my right hon. Friend perceived the great anxiety felt by my hon. Friends and myself about the threatened dock strike? As time is now running out, may I ask whether he could persuade the Minister of Labour to make a statement to the House very early next week, preferably on Monday or Tuesday, about the exact position?

Mr. Macleod: My right hon. Friend the Minister of Labour is in the closest touch with the parties concerned. I think that it is always wisest in these matters, if one can, to leave it to the Minister, but if it is appropriate I will consult him as to whether he will make a statement.

Mr. Short: Has the right hon. Gentleman seen an all-party Motion on the Order Paper about the local government Boundary Commission?

[That this House would welcome a declaration by Her Majesty's Government on the intended procedure to be adopted for dealing in Parliament with the recommendations of the Boundary Commission on local government reorganisation, and objections thereto, and considers that an undertaking should be given by Her Majesty's Government that no final decisions will be taken until this House has had an opportunity fully to consider the recommendations.]

Will the right hon. Gentleman give an assurance that the Government will not make up their mind about any Boundary Commission Report or any number of Reports before the House has had an opportunity of debate? Will the right hon. Gentleman take note of the second part of the Motion, which asks the Government now to declare the procedure which they intend to follow on these Reports?

Mr. Macleod: The procedure is extremely lengthy and complicated and, of course, brings the House into the matter. It is extremely unlikely that the Orders in which the hon. Member is particularly interested will come before


the House this Session. If I have reason to think that that is wrong, I will let the House know at an early date. Any changes, after public inquiry and all the rest of it, have to be embodied in Orders which come before Parliament. Major alterations are subject to affirmative Resolutions and others can be prayed against. The House, therefore, has plenty of opportunities in these matters.

Mr. Peyton: Has my right hon. Friend had time to look at the admirable and almost uniquely intelligible little Bill which I introduced to amend the Road Traffic Act, 1960, and to repel the mechanisms of bumbledom? Will he see that his right hon. and hon. Friends in the Government do not object to this Bill tomorrow when it comes hopefully forward for Second Reading?

Mr. Macleod: No, Sir. I can give no undertaking about that, nor that other hon. Members will not object. If a Bill comes forward after the ordinary time for debate, all hon. Members have the right to object to its Second Reading.

Sir L. Plummer: Can the right hon. Gentleman say when he proposes to hold a debate on the Radcliffe Report, thus giving us an opportunity of hearing the Government's proposals arising from it?

Mr. Macleod: No, Sir, but I will take note of the hon. Member's request. It does not come into the business I have announced.

Mrs. Castle: Has not the right hon. Gentleman seen the very grave warning issued by Sir Bernard Lovell about the possible consequences of the American high-level tests and the dangers which may carry in their wake not merely fall-out, but permanent interference with the magnetic field of the earth? [Laughter.]

Mr. Driberg: They think it funny. They are illiterate fools.

Mr. Speaker: Order. It is in the interests of everybody that business questions should be confined to the business announced for next week. The more we get into epithets and speeches, the less progress we can make.

Mrs. Castle: I am trying to point out to the Leader of the House, Mr. Speaker, that here is an urgent matter in which

the Government have grave responsibility. If a man of the scientific stature of Sir Bernard Lovell can solemnly warn us that the scientists know not what they do when these tests are conducted, have not the Government the duty to this House, the country and the world, to hold an immediate and urgent debate on this matter so that we can probe these dangers?

Mr. Macleod: Of course, this is an enormously important subject, but I have answered the point put by the hon. Lady. In the business for next week, there is one day of Government time which we are devoting to a debate on Central Africa, which the House very much wants to have before my right hon. Friend the Home Secretary goes out there. Two other days are available and I must make the point that these are days on which the Opposition pick the subjects for debate. If the Opposition wish to have a debate on this, or to censure us for what we have done, that can be arranged, but I do not think that, having taken this decision, it is necessary for the Government to provide time to debate it.

Mr. F. M. Bennett: Can my right hon. Friend recall whether there was a similar approach from certain quarters below the Gangway opposite for a similar debate during the Russian tests?

Mr. S. Silverman: Yes, there was.

Mr. Rankin: Can the Leader of the House say whether the Government propose to bring in at an early date a Pipe-lines Bill with particular reference to Scotland in order to release the many jobs so badly needed to fill the gaps in Scottish industry?

Mr. Emrys Hughes: Is the Leader of the House aware that, if there is no debate on nuclear tests, a large section of public opinion will believe that Parliamentary government and democracy have become a fraud and a farce? Is he aware that there is very great interest in this matter? [HON. MEMBER: "No."] Have a debate and try it. Is not the right hon. Gentleman following the precedent set in the case of the Polaris base, which was never endorsed by this House? Is he not sidetracking the right of the people of this country to express a point of view which is widely felt?

Mr. Macleod: The hon. Gentleman is not being accurate. I am following the ordinary procedure which any Leader of the House follows by saying that on certain days the Opposition have the initiative for debate while the Government have the initiative on other days. I have answered the question in that sense.

Mr. Donnelly: I wish to return to the matter of the two gentlemen in Moscow. Is the right hon. Gentleman aware that Burgess is reported to be saying that certain members of the Government have been helping him, out of friendship, to obtain funds in Moscow? Is the right hon. Gentleman aware of the seriousness of this and will he arrange for a Government statement to be made next week to clear this matter up once and for all?

Mr. Macleod: I cannot believe that that has any relevance to the business I have announced.

Mr. S. Silverman: Does the right hon. Gentleman realise that the answer he gave to my hon. Friends the Members for Ebbw Vale (Mr. M. Foot) and Blackburn (Mrs. Castle) was entirely inadequate? Will he not reconsider the matter? Will he not bear in mind that what is involved here is not only the series of tests, with all the implications which my hon. Friends have explained, but that those tests are being carried out, without the authority of Parliament, largely on British territory?
Does not the right hon. Gentleman consider that it is the Government's duty, and not the duty of the Opposition, to afford some opportunity for the House to endorse or reject the permission which the Government have given, without authority, for the use of British territory for this purpose? That there are many hon. Members in the House,

including this side, who do not want a debate has got nothing to do with the fact that those who do want a debate are surely entitled to have one in a matter of this kind, and that the responsibility for providing the time must rest fairly and squarely on the shoulders of the Government and cannot be shifted and evaded in the way in which the right hon. Gentleman has done.

Mr. Macleod: I have no intention of trying to shift or to evade my responsibilities. I have gone into this matter in response to a number of similar questions. I do not think it appropriate, nor do I intend, to provide Government time at present to debate the matter which the hon. Gentleman and his hon. Friends have raised.

Mr. Driberg: Shame.

Mr. Short: May I refer back to my previous question to the right hon. Gentleman? I think that he misunderstood my point. When we reach the stage of a provisional Order on a boundary, we reach the point of no return. Will he give an assurance that, in the case of the North-East and other areas, the House will have an opportunity to debate the Commission's proposals before the Government decide what to put in the Orders?

Mr. Macleod: No, Sir. I do not think that I can give an assurance in those terms, because the procedure has already been laid down and enacted by this House. I cannot alter it by exchanges across the Floor. But, through detailed talks over many months and the opportunity for objections, representations and public inquiries, there is the fullest opportunity both for local and for Parliamentary opinion to make itself heard.

Orders of the Day — FINANCE BILL

Order for Second Reading read.

3.49 p.m.

The Chief Secretary to the Treasury and Paymaster-General (Mr. Henry Brooke): I beg to move, That the Bill be now read a Second time.
No one can be poetic about a Finance Bill. Budget day each year is different. It is something to look forward to. It has the same sort of excitement as the Cup Final, because one may have to wait until the end to know whether one has won or lost. The Finance Bill has none of these thrills. It is more like the playback at slow speed of a conscientious commentary upon the game in language not always easy to follow. It is not easy to follow, except for the lawyers, of course, and that is why my right hon. and learned Friend the Attorney-General will wind up the debate—so that he can explain to us anything which no one else can understand.
This time we all have the advantage of a paper-backed novelette called, "Taxation of Short-Term Gains", which my right hon. and learned Friend the Chancellor of the Exchequer published just in time for hon. Members to take it away and relax with it over Easter. For the purpose of my speech this afternoon I propose to take it as read, although I shall have something to say on those Clauses of the Bill.

Mr. Frank Bowles: Certain hon. Members, including myself, are trustees of the House of Commons Members' Fund. It is stated in the White Paper, and was also stated in the Observer of two Sundays ago, that trustees are liable to pay the tax on any capital gains which are made by the beneficiaries, namely, Members of House of Commons. We are trying to increase the value of the fund for the benefit of Members, as the right hon. Gentleman knows, and I hope that he can give us some assurance that we will not be taxed because we are doing our duty by the House.

Mr. Brooke: I can certainly give the hon. Member that assurance, if he is conducting the fund as a charity, which it

should be. It is only if he were to seek by some means to derive some personal benefit from it himself that he might become liable to tax. If he reads the Bill carefully, he will see that charities are exempt.

Mr. Peter Tapsell: Will my right hon. Friend say a word about the curious differentiation between the treatment of proprietary and mutual insurance companies?

Mr. Brooke: I said that I was coming to the taxation of short-term gains, and it would be better to wait until that part of my speech.
In moving the Second Reading of the Bill, I shall not again deploy all the arguments for the Budget. They have been debated for four full days in Committee of Ways and Means and for many more days than that in the newspapers, and they have stood the test. I am sure that the job of the mover of the Second Reading of the Finance Bill—and it is a job of which I have some experience—is to try to be one or the other—concise or comprehensive—but at least to be comprehensible. As I remember being charged at this Box years ago, quite unjustly, with explaining some other Bill backwards, I shall be conventional this time and start with Clause 1.
As the House will see, Clause 1 deals with the Customs regulator and also with the changes in revenue duties other than Purchase Tax which are related to the removal of the regulator surcharge as from Budget day. Subsection (1) gives effect to the removal of the surcharge. Subsection (2) concerns duty changes and subsection (3) renews the regulator power for a further year.
I have heard no serious criticism of my right hon. and learned Friend's decision to keep this regulator power in being. During the past year his regulator proved its worth and did so with the minimum of administrative friction. In the Budget debate, the hon. Member for Sowerby (Mr. Houghton) called it, "this useful and novel device" with an almost proprietary air. He seemed to fear only that the Chancellor might somehow have damaged its integrity by replacing last year's surcharge action with substantive changes in rates of duty in the Finance Bill.
The renewed surcharge power will again apply to Purchase Tax on the same list of duties as before, including those for which no substantive increase, taking the place of the 10 per cent. regulator surcharge, is now being made. Perhaps I should add that when, under Clause 3, what are called the breakfast table duties are in due time transferred from the revenue duty system to the protective duty system, they will thereby automatically move outside the scope of the regulator. The maximum percentage surcharge or rebate remains at 10 per cent. for the coming year and the general machinery of the regulator is unaltered. The surcharge orders or rebate orders will continue to require an affirmative Resolution of this House within 21 calendar days.
My right hon. and learned Friend could have left the surcharge in being until the end of August and asked the House to approve its further continuation thereafter. Some hon. Members have spoken as though that would be a more appropriate course than removing the surcharge as from Budget day and in the Budget proposing substantive increases in duty to secure a broadly equivalent revenue yield. I find that difficult to understand in view of all that the Opposition used to say in last year's debate about the constitutional significance of the regulator and the dangers which might flow from the exercise of this important power by the Chancellor of the Exchequer without close and continuous Parliamentary supervision and control.
Surely it is right at this time of year, when taxation as a whole comes under review, that we should start afresh, that the House should consider in detail what is the right pattern of taxation on which to start the new fiscal year and that it should do so without the complication of a continuing temporary impost which could be altered or withdrawn at any time, but upon which Parliament could take no initiative but simply approve or disapprove the judgment of the Government as to timing and degree. My right hon. and learned Friend said explicitly in his Budget speech last year, when he introduced the regulator for the first time, that the Budget should remain the chief instrument, and that is the basis on which this year's proposals are founded.
The statutory increases which take the place of the temporary 10 per cent. increases under the regulator affect alcoholic drinks, tobacco, hydrocarbon oils, except the heavy oils which carry duty at 2d. or 3d. a gallon, football pool betting and television advertisements. The application last July of a flat 10 per cent. surcharge to all those specific duties also has the effect of temporarily increasing by 10 per cent. the preference and protective margins between the various duty rates. Permanent increases in those margins would be contrary to our international obligations and so the margins are now restored to their correct amount. That is why, although they are about 10 per cent., the increases are not an exact 10 per cent. all round.
The opportunity has been taken to make some minor improvements in the duty structures. In the case of the heavy oils liable to tax at 2d. or 3d. a gallon, in the case of betting at dog racecourses, and in the case of matches and mechanical lighters, my right hon. and learned Friend came to the conclusion that there were special considerations for not increasing the basic duties in order to replace the surcharge.
Clause 2 deals with a lesser but important matter. It provides for reduced rates of revenue duties on certain imports from other countries of the European Free Trade Association. This stems from the obligations which we undertook as signatories of the Stockholm Convention. As the House knows, that convention provides for gradual elimination of tariffs imposed by each member of E.F.T.A. against the industrial goods of other members. Duties which are wholly protective in charac-must be eliminated altogether, but different rules are necessary for revenue duties because they are important components in each country's budget.
For revenue duties the Stockholm Convention provides only for the elimination of what are called the protective elements. The revenue duty on imported beer is higher than the Excise duty on British beer and there is, therefore, a protective element in the beer duty. The protective elements in our revenue duties have to be eliminated by the end of 1964, and in the Bill we are making the first moves in that direction by interim reductions in the case of beer, spirits,


manufactured tobacco, matches and mechanical lighters. These are, naturally, the counterparts of reductions made in our favour by other countries in the European Free Trade Association in their revenue duties.
The main object of Clause 3 is to free from duty all the sugar produced in this country and all imports of Commonwealth raw sugar. Supplies from these two sources are. in fact, enough to meet most of our domestic requirements. The Excise and Commonwealth duties on the other main sweeteners—if I may so call them—glucose and saccharine, are also abolished, and so is the duty on molasses whatever its source, and the duties on cocoa and coffee from the Commonwealth are similarly abolished. All that is left are the margins of protection for home and Commonwealth sugar, glucose and saccharine and for Commonwealth coffee and cocoa.
The Clause also includes consequential provisions to maintain in the new circumstances the general effectiveness of the Sugar Act, 1956, under which the sugar surcharge is levied. That surcharge is, of course, a different one from the general surcharge with which Clause 1 is concerned.
I need not dwell on Clause 4. It makes three minor amendments relating to the hydrocarbon oil duty. Each one of them removes an anomaly or anachronism, and the House may care to know that each one of them operates in the taxpayers' favour.
Clause 5 does some similar tidying up in the field of vehicle excise licensing. It makes clear that the penalty for unlicensed use of a vehicle is calculated from the annual rate of duty, and it also provides a penalty for a false declaration in an application for a motor trader's licence.
Clause 6 and the Eighth Schedule of the Bill are much more important. They deal with Purchase Tax.

Mr. Gerald Nabarro: Mr. Gerald Nabarro (Kidderminster) Hear, hear.

Mr. Brooke: The first subsection of Clause 6 gives effect to the Budget proposals to reduce the great disparity between the existing rates of tax by substituting the three rates of 10 per cent., 25 per cent. and 45 per cent. for the previous

four rates, and it also extends the tax at the new rate of 15 per cent. to confectionery, ice cream and soft drinks.
Any extension of the tax, as the House well knows, to an important new class of goods is liable to give rise to a number of unfamiliar problems in the industries and trades concerned, and that was the reason why the Chancellor fixed 1st May rather than Budget day itself as the date on which the new tax on sweets, soft drinks and ice cream would come into effect. The industries concerned made representations that this gave them not enough time, and my right hon. and learned Friend decided to postpone the operative date by a week until 8th May. That is the date given in the Clause.
My right hon. and learned Friend realises that this postponement does not give the manufacturers all the time that they would probably wish for adjusting their production to the fact that their goods will in future sell at prices which must take account of the new tax, but it gives them more time to adapt their accounting systems so as to meet the legal obligations which tax will impose, and that is the essential thing for them at the outset. I should like, on behalf of my right hon. and learned Friend, to express thanks to the organisations representing all the trades concerned for the practical help they have given to the Customs and Excise over the administrative arrangements for this new tax.
There is a special point about ice cream which I ought perhaps to mention. Some of the ice cream sold from ice cream vans or by small makers in shops is made at the actual time of consumption or just before it, from what are known in the trade, I understand, as complete ice cream mixes, substances which may require the addition of water, but which, apart from that, need only aeration and freezing. Some of the people who work in this way are traders on their own account and, therefore, would be legally liable to come under tax control as manufacturers of ice cream.
We propose to avoid that inconvenience for both them and the Revenue by making use of the power in Section 12 of the Finance Act, 1954, to assess tax


on these complete ice cream mixes on the notional wholesale value which they would have as finished ice cream. This has the assent of the trade associations concerned. I mention this because a Treasury Order will be needed to apply Section 12 in the particular case of ice cream, and that Order has been tabled today and will come into operation along with the tax on 8th May. I thought I ought to take the opportunity of explaining to the House the reason for making that Order.
There is also a small point in subsection (2) of the Clause relating to soft drinks which perhaps I ought to explain. The subsection secures that where a drink is made up by mixing a taxable soft drink or soft drink concentrate with a drink which has borne revenue duty—to make, for instance, as I am sure the hon. Member for Sowerby often makes for himself, a shandy—or with a tax-free drink, to make—as maybe the hon. Member less often makes for himself—something like a milk shake, then tax will have been charged on the value of the soft drink constituent.
That, of course, would be the rule in the majority of cases, even without the subsection, where the mixing is done by the drinker himself, whether it was the hon. Member for Sowerby or someone else, or at a bar. The subsection secures that the same rules shall apply if the mixing is done before the point of consumption by a manufacturer who is a registered person under the Purchase Tax law.

Mr. Douglas Houghton: Might I ask the right hon. Gentleman why he is picking on me? I do not want my taste in drinks to be bandied about.

Mr. Brooke: I have done it because I understood that the hon. Gentleman was to follow me in the debate and because I found him very attractive and interesting to look at. Somehow, the thought of his drinking a shandy occurred to me but the thought of his drinking a milk shake, frankly, did not.
There is also a useful provision in subsection (4)—this is perhaps rather more important—to expedite the procedure for adding essential drugs and medicines to the list of those which are

exempt from tax. These additions, to take account of the continuing introduction of new substances, are made on the advice of the Government's medical and veterinary advisers in the Ministry of Health and the Ministry of Agriculture. Up to now the substance has had to be exempted from tax by Treasury Order. That has sometimes involved some delay, because it is hardly practicable to make a separate Order for each recommendation individually.
This subsection will give the Customs and Excise power to implement these recommendations by means of an administrative direction. The direction will be valid for a limited time not exceeding fifteen months. The intention is to lay before the House an annual Treasury Order to give permanent form to the exemptions made by direction during the preceding year. The Order will, of course, be debatable. This also affects the proceedings of the House. That is why I thought it right to mention it. I hope that this improvement will commend itself both to the House and to the pharmaceutical industry.
To come to the Inland Revenue Clauses—

Sir Cyril Osborne: Before my right hon. Friend leaves the subject of Purchase Tax, might I ask, with regard to the adjustment to the Purchase Tax on clothing, whether it is the Government's intention to damp down the demand for clothing?

Mr. Nabarro: No.

Sir C. Osborne: It is no good my hon. Friend saying, "No". The traders are asking this question, and my hon. Friend the Member for Kidderminster (Mr. Nabarro) does not know everything.

Mr. Nabarro: A ridiculous question.

Sir C. Osborne: I protest at this, Mr. Speaker. It is not a ridiculous question. Yesterday, I was asked to put this question by people in the trade, who at least know what they are talking about.

Mr. Speaker: It is the duty of hon. Members who are not occupied in speaking and are not seeking leave to intervene to keep quiet or be quiet enough not to interfere with hon. Members who are speaking.

Sir C. Osborne: I wish to put this question to my right hon. Friend. Those in the trade have asked me to put the question to him. Is he aware that the increase in the tax on certain classes of clothing is having a serious effect upon the demand for that clothing, and is it the Government's intention by increasing the tax to damp down the demand for this clothing? Is that the intention?

Mr. Brooke: That is not my right hon. and learned Friend's intention in increasing the tax on clothing and furniture from 5½ to 10 per cent. He does not take the view that so small an increase of only 4½ per cent. is likely to have any substantial effect, although it may have some short-term effect, in damping down the demand for clothing, if that is the right verb to use. My right hon. and learned Friend explained at some length in the Budget debate that his overriding objective is to bring the rates of Purchase Tax closer together. Hitherto, the highest rate has been ten times the lowest. In future, if the House approves the Bill, the difference will be not ten times, but only four and a half times.

Mr. Douglas Jay: Before the right hon. Gentleman leaves Purchase Tax, will he explain a rather more important point than some which he has been explaining? He claims to be simplifying the tax by substituting three rates for the previous four rates. Why have the Government introduced this item including sweets and ice cream at a new rate of 15 per cent. and not at the 10 per cent. rate at which others have been consolidated?

Mr. Brooke: That is a fair question. If I seemed to dwell on matters of some detail I did so because they had some Parliamentary impact and I therefore thought it right to tell the House about them.
My right hon. and learned Friend considered very carefully at what rate he should introduce the new tax on confectionery and, to be frank, he would have liked to have taken one of the existing rates, but it seemed to him that 25 per cent. would be an unduly high rate to impose as a new tax on something which had not been taxed before, and he equally felt that 10 per cent. would be too low and would not give

him the amount of revenue which he considered that he required from this field of goods, which, frankly, are not as necessary to any of us as the cutlery, crockery and carpets which are already taxed. That was the reason, but I have no doubt that this matter will be further debated when we come to the Clause.

Mr. Arthur Lewis: A large firm in my constituency which manufactures sweets has said that because this duty will fall very hardly upon the young and the very old, it will pay the tax. That is very commendable and it is something which other manufacturers might well follow. Will the Minister say whether the firm will be able to do this, and, if so, in view of the Government's desire to keep prices down, whether they will recommend other manufacturers to follow that lead?

Mr. Brooke: I certainly think that it is commendable and that the firm will be free to do it, but in all these tax matters we must leave manufacturers to be their own judge as to whether a tax change causes them to alter their prices. The Government will in no way regret or withstand it if a firm decides to pursue the selfless policy which the hon. Member has mentioned.
We come to the Inland Revenue Clauses, beginning with Clause 7, which is a meaningful but unoriginal Clause which formally reimposes Income Tax for the current year at unchanged rates. Clause 8 is of greater interest because it enacts the special relief for small incomes which was a universally popular feature of the Budget.

Mr. Nabarro: Before my right hon. Friend leaves the question of Income Tax, may I ask whether there is not a significant omission from Clauses 7 and 8? In view of my right hon. and learned Friend's Budget speech, should there not be included the statement that no assessment shall be made in respect of Income Tax Schedule A on owner-occupied houses after 5th April, 1963?

Mr. Brooke: It would not be appropriate to legislate upon Schedule A in this Bill. My right hon. and learned Friend made it clear that he regarded the Budget of 1963 as the appropriate time


at which to submit his Schedule A proposals.

Mr. Nabarro: I am just reminding my right hon. Friend.

Mr. Brooke: I will not forget.

Mr. Nabarro: I shall not let my right hon. Friend forget.

Mr. Brooke: I will come back to the important Clauses 9 to 15, dealing with short-term gains, but perhaps the House will first permit me to run over a number of matters in the rest of the Bill which are minor in comparison but which are quite important to a number of individuals.
Clause 16 exempts the new Army bounties from tax and I am sure that it is uncontroversial. Clause 17 is long and rather technical, but it amounts to a worthwhile improvement of the arrangements for according tax relief when losses are made in a trading venture. That is a provision which will benefit the shipping industry. Clause 18 is technical and even a bit longer, but it is quite simple; it is a logical corollary to the provision introduced last year under which double taxation arrangements can be made in which this country undertakes to give credit for tax "spared"—that is the technical term—in an overseas territory; it is credit for tax which would have been charged in that territory but for special tax relief granted with a view to promoting development there.
The Clause sees to it that the proper consequences will follow when income which has been relieved from tax under this provision is passed on by a United Kingdom company in the form of a dividend. This was a very good point which was raised in Committee on last year's Finance Bill by my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow).
Clauses 19 to 21 strengthen the defences against tax avoidance. In his Budget speech my right hon. and learned Friend indicated the aims of these provisions, and I need not go over again what he said. I am fairly sure that any points raised on them are likely to be points of detail for discussion in Committee.
There are three Clauses concerned with Estate Duty. Clause 22 increases

the exemption limit to £4,000 and makes appropriate reductions in the rates of duty for estates not exceeding £6,000. It makes a minor consequential amendment to the law on compulsory redemption of land tax. Hon. Members may recall, although they will be very clever if they can, that since 1949 any outstanding land tax has to be redeemed when property changes hands. If, however, the property changes hands on the death of the owner and his total estate is less than £2,000, the land is freed from land tax without payment.
In 1949, £2,000 was the exemption limit for Estate Duty, but the two limits got out of step in 1954 when the Estate Duty limit was raised to £3,000. Subsection (2) substitutes in the land tax provision henceforth the current Estate Duty limit for the time being. That seems sensible and the cost is trifling.
Clause 23 provides that immovable property situated abroad shall be liable to Estate Duty when it passes on the death of a person domiciled in this country—a death after the Bill has reached the Statute book, perhaps three months' hence. There has been a gap here which has come to be exploited on quite a large scale. It is inherently reasonable to charge immovable property abroad just as movable property is charged. But this change is being accompanied by a new provision of unilateral relief for any overseas duty. This is an act of justice.
Clause 24 introduces this new relief. It means that whenever the United Kingdom charges Estate Duty on property in another country, credit will now be allowed against the Estate Duty payable here for any death duties payable in respect of that property in the other country.
This new relief, unlike Clause 23, will apply to all deaths after Budget day. Incidentally, the Clause also extends the existing power to make bilateral agreements with other countries for relief from double death duties. Hitherto, the law has authorised the granting of relief by way of credit under such agreements only where the other countries' death duties were similar to ours. That limitation will now disappear.
The Bill then enacts two useful reforms in stamp duties. Clause 25 gives


effect to the abolition of settlement duty, except for unit trusts, and removes a minor anomaly in its application to unit trust schemes. My right hon. and learned Friend explained in his Budget speech the reason for this change.
Clause 26 does not alter the amount of any duty, but in certain circumstances it allows a different method of payment to be used. It concerns the 6d. duty on various insurance policies, such as those for fire, accident or marine risks. The embossed stamp hitherto used on those documents has been found to be an obstacle to the use of some of the most modern office machinery, and to remove this difficulty—because we none of us wish to frustrate firms wishing to modernise their methods—the Revenue is given power to permit insurance companies to account in bulk for the duty, instead of having each document separately stamped.
Businesses which receive policies from abroad will be authorised to stick on adhesive stamps, instead of sending them to a Stamp Office to have an embossed stamp impressed on them.

Mr. F. J. Bellenger: Does that apply to documents such as leases and tenancy agreements?

Mr. Brooke: It applies to documents which are at present liable to a 6d. stamp—to insurance policies.

Mr. John Hall: Could not this also apply to brokers' notes in respect of share transactions? Difficulty in this respect is also experienced by brokers who want to use modern office machinery.

Mr. Brooke: My right hon. and learned Friend will be willing to listen to any such representations. This matter has been strongly represented to him, and this seemed a quite simple method of overcoming the difficulty.
Finally, Clause 27 simply enacts the Chancellor's proposals, announced in his Budget speech, for speeding up the redemption of tithe annuities. This is of some importance as an economy measure. These annual payments, many of them quite small, are relatively expensive to collect, and redemption by a capital payment wherever reasonable and possible will lead to economies in staff.
I now come to the most novel feature of the Bill—the speculative gains tax. Clause 9 lays down the basic charge, under the new Case VII of Schedule D of Income Tax, on gains from the acquisition and disposal of what the Bill comprehensively describes as "chargeable assets." No liability arises unless the person who makes the gain is both resident and ordinarily resident in this country. There is, therefore, no reason why the new tax should act as any discouragement to foreigners to buy stocks and shares here. In spite of all the gloomy prophecies by journalists in the weeks before the Budget, the Clause makes it clear that there is no retrospection.
The House already knows of the limiting periods of three years for land and six months for other property, which are also set out in the Clause. Losses accruing in the year of assessment and any unexhausted losses carried forward from earlier years can be set against Case VII gains if those losses arose out of transactions which would have given rise to a Case VII charge if they had been profitable and not unprofitable. A gain becomes chargeable for the year of assessment in which it accrues, and the general rule is that it is treated as accruing at the time when the asset is disposed of. But that could not easily apply to "bear" transactions, and so the profit, if any, from a "bear" speculation is treated as accruing when the asset is acquired.
That must be right because, in the rather upside-down world where "bears" live, the transaction is closed by buying what has already been sold. I have seen it suggested that "bears" are being treated with special severity by being made liable however long the interval between sale and purchase, but my right hon. and learned Friend's purpose in laying down a limited period was to find a rough and ready means of marking off speculation purchases from investment purchases. There is no likelihood that investment lies behind a "bear" speculation, where a man starts by selling something that he has not got.
The charging of Income Tax under the Clause will automatically carry with it a Surtax charge if the individual's income brings him into the Surtax category. He pays tax, therefore, at whatever rate is appropriate to the addition


to his total income from all sources. This must be right, given the basic principle that these short-term gains are being regarded as income rather than capital receipts.
If the gain accrues not to an individual, but to a company or other body liable to Profits Tax, subsection (7) provides that the gain will be subject to Profits Tax. This charge to Profits Tax is framed in terms which take account of the existing arrangements by which a group of associated companies can elect to have their business aggregated for purposes of computing Profits Tax liability. The main framework of the tax is contained in Clause 9.
Clause 10 defines what shall be chargeable assets. In principle, all forms of property, whether situated in this country or abroad, are chargeable assets, but there are important exceptions. To begin with, the Clause sweeps into the net all forms of property apart from tangible movable property. Next, three types of tangible movable property are brought in, that is to say, commodities dealt in on a futures market; currency, other than currency for an individual's personal expenditure abroad; and any movable property acquired with a view to its use in a trade or business which in the end is disposed of without being used in that way.
The broad effect of all this is that the Clause keeps outside the scope of the tax personal belongings of all kinds, such as furniture, pictures, and cars. The Clause also exempts a man's own house, if it is his only or his main residence. That includes the garden or grounds in which it stands, up to one acre, or a larger area if something larger appears justified on the facts of the case. There is exemption, too, for buildings used solely for the purposes of the seller's business or for the discharge of the function of a public authority. It is reasonable to assume that these buildings will not have been purchased for speculative purposes.
There is one other small point to which I should refer. The reason why commercial woodlands are mentioned separately is the technical one that the occupation of woodlands does not necessarily fall to be treated as a trading

venture, even though the land is managed with a view to profit. The final category excluded from chargeable assets consists of patent rights. The reason is that capital sums received from the sale of patent rights are already chargeable under special legislation, and it would not be right to have any overlap with Case VII.
If the only possible transactions in property were outright purchase and sale we would now be almost at the end of the story, and of my speech. But ownership can be divided up in different ways and acquisition and disposal can take place by a variety of methods. A code of rules must, therefore, be laid down for special circumstances and that is what Clause 11 does.
For example, the acquisition or disposal of a leasehold interest in land will be treated as the equivalent of an actual acquisition or disposal of land. Another technicality for which provision must be made is where a contract for sale is entered into and is later followed by a formal conveyance. The transaction will be regarded as taking place at the date of the contract rather than at the later date of the conveyance. Special attention should be given in Clause 11 to the rules for property which is passed on otherwise than by sale. Where a gift is made—and this is extremely important—the normal rule will be to treat the giver as though he has disposed of the asset for its market value. But there are special rules in the Ninth Schedule under which liability will not arise if the giver has had the property for less than six months or three years, as the case may be, but the total period between acquisition by the giver and disposal by the recipient exceeds six months or three years.
No charge under Case VII will arise on the passing of property upon death and neither executors nor heirs are to be chargeable on the disposal of assets passing to them through a death. Clause 12 indicates how the amount of a gain or loss is to be measured. The principle involved is simple enough—a straightforward balancing of receipts and outgoings for each disposal. Rules are needed when a group of assets is disposed of in a single bargain, but oily some of them are chargeable assets. The Clause must be of some length to include


directions to meet the many variants like that and away from the simple purchase and sale of a single asset.
Hon. Members may consider that Clause 13 looks a trifle complicated. However, the idea behind it is quite simple. The speculative sale of land need not always take place directly. An equivalent effect might be secured by arranging a sale of the shares of a company which was the legal owner of the land. It would be unrealistic to permit that indirect sale to go tax-free simply because six months is the governing period for shares, though three years for land. The Clause provides that even where the six months' period is exceeded, on a disposal of shares in a closely controlled land-owning company, a vendor who possessed a substantial interest in the company can be held liable under Case VII. The amount on which he is charged is not to exceed the appropriate part of the gain for which the company would have been chargeable had it undertaken a direct sale of the land.
Clause 13 operates whatever the date on which the vendor acquired his shares, but the Clause seeks to reach the gain on the indirect disposal of the land and is framed so that it cannot operate except in relation to land which the company acquired after Budget day, 1962.
Everyone, I am sure, will approve of Clause 14, which concerns the point raised by the hon. Gentleman the Member for Nuneaton (Mr. Bowles). The existing law confers exemption from Income Tax on charities and various types of pension fund, and so on. As the short-term gains are treated as ordinary income, obviously the same exemption should be carried over to the new Case VII. To answer the queries raised by the hon. Member, the Members' Fund is exempted from Income Tax on the interest earned by its investments by Section 385 of the Income Tax Act, 1952, and this exemption is carried over for the purpose of Case VII by Clause 14 (3, a) of the Bill.
My hon. Friend the Member for Nottingham, West (Mr. Tapsell) raised a point about life assurance. I think I know what my hon. Friend had in mind. While I cannot give him a definite answer today, I can say—if he and I are in agreement on the subject matter

—that this is a topic on which a deputation has been received in the last few days. My night hon. and learned Friend is carefully considering the matter in the light of what that deputation said and I hope that it will not prove to be an insuperable difficulty.

Mr. Jay: This is an extremely important point. Can the Chief Secretary say why the Government decided to introduce a provision embodying a distinction between ordinary insurance companies and mutual societies?

Mr. Brooke: There was a reason for that which my right hon. and learned Friend the Attorney-General will be prepared to deal with later at greater length. It was not intended to be in any way intentionally or morally discriminatory against the mutual companies. The principles on which those provisions were framed were found to create this distinction and we are now examining it to see whether there is a powerful case for its removal, as the deputation sought to argue.

Mr. Jay: Is that a way of saying that it was a mistake?

Mr. Brooke: No. While examining these Clauses in Committee we are liable to find that we can make improvements. Every hon. Member who has had anything to do with Finance Bills over the years will know the vast difference there is when one is introducing a new tax for the first time and when one is merely amending an old one. I do not think that it should be held to the discredit of the Government, or of its very learned and conscientious advisers, if, while going through the Bill, we find loopholes or overlaps which we can eliminate by amendment in Committee.

Mr. Bowles: I am grateful for the information that the right hon. Gentleman has given concerning the Members' Fund, but can he say anything about ordinary trustees? The White Paper states that trustees are themselves personally liable, but not the beneficiaries. Is that true?

Mr. Brooke: That is true, but what I said about charities is also true.
Clause 15 deals in detail with various necessary definitions and with the application of Case VII in a number of special situations. I would draw the attention


of hon. Members to the provisions in subsection (5), relating to the supply of information. Parliament is always sensitive, and rightly so, about conferring inquisitorial powers on any Government Department. But there is no unjustifiable breach of confidentiality here. If the Inland Revenue thinks that a false return has been made it can ask for simple factual information, that is to say particulars of purchases or sales in which the agent concerned has acted on behalf of a named client. There is no ground for suggestions I have heard that various inquiries—for example, into advice given by an agent to his client about transactions—

Mr. A. P. Costain: How does my right hon. Friend conceive that a stockbroker should keep information for many, many years? Will he be expected to go back for many vears in his files for this information?

Mr. Brooke: No practical difficulty will be found. I do not think that anyone will be required to dig out records which would not ordinarily be preserved. After all, one must make a return year by year. As happens normally in certain circumstances, the Inland Revenue might wish to make inquiries if it had reason to think that a taxpayer was concealing transactions which had led to short-term gains. The Inland Revenue, in its own interests, would wish to make those inquiries with the least possible delay, However, those and many other matters we shall be examining in Committee.
Although some of the provisions in a few Clauses of this Bill are no doubt controversial, I think that it will be found that a great part of the 1962 Finance Bill is not likely to be controversial on what I might call party lines. I hope, therefore, that we may be able to set to work together to improve the detail of the Bill if defects come to light in it, particularly where we are introducing a wholly new tax. My right hon. and learned Friend the Chancellor of the Exchequer is encouraged by the strength of sterling and by the growing evidence of the effectiveness of his economic policies. On his behalf, I commend this Bill, which carries them further, to the House.

4.41 p.m.

Mr. Douglas Houghton: The right hon. Gentleman the Chief Secretary began his speech by saying that no one can be poetic about a Finance Bill. After having listened to him, I am sure that we can all believe that, but it is possible to get excited and even passionate about a Finance Bill, and I shall be both before I have finished.
What an extraordinary choice of official spokesmen for the Bill. We can well understand that the Chancellor wants a rest, although I shall want to know what he has been saying at Sheffield lately.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): Would the hon. Member like to see a copy of the speech I made there?

Mr. Houghton: It rather looks as if the Chief Secretary has been put up to take the poetry out of the Bill and the Attorney-General has been put up to take the fun out of the Bill. Nevertheless, I am sure that the House would wish to commend the Chief Secretary's lucid and clear explanation of the Bill. I always admire his self-assurance. Few Ministers can stand more firmly than he on the crumbling authority of Her Majesty's Government.
The Chancellor is to be congratulated on at least one thing. That is the production of what the Chief Secretary calls the novelette, the "Explanatory Memorandum" to the Bill. This does not, as I would have wished, cover the whole of the Bill, although it certainly deals with its most difficult and numerous Clauses. I have been pressing for years for explanatory memoranda on Finance Bills, because I am anxious that the House should know what it is doing from the beginning. It always puzzled me why it should be assumed that Members of Parliament do not need to understand the laws they pass.
There was one Chancellor of the Exchequer who said he would make an attempt to make Income Tax "understanded of the people." Why not begin by making it understanded by Members of Parliament? This I urge on the House seriously and shall continue to do so, as there is a big gap in the arrangements which enable hon. Members to do their


business intelligently. Nevertheless, I thank the Chancellor for what he has done on these particular Clauses in the Bill.
The Chief Secretary said that he would not go over all the ground of the Budget, that there had been debates on that, and that he would get straight down to discussing the Bill. I would have done the same had it not been for the Chancellor's speech making at the Cutler's Feast, at Sheffield. I fully agree that it is always as well for any Chancellor to keep on good terms with the men who make "the long knives". It is perhaps understandable that he struck a more optimistic note at Sheffield than he had done on Budget day. It seems as if from Sheffield, at all events, the Chancellor can see the first light of day over the Wirral.
During 1962, he said, things will be better under the Tories, barring disturbances abroad and stupidities at home. I ask him: whose stupidities at home? He is getting ready to take all the credit and to apportion any blame there may be by pushing the responsibility on to someone else. He described the attack on the £ last year as
the most sustained attack on sterling since the one that resulted in devaluation in 1949.
Who did the attacking and why? Who got us into this lamentable position of weakness? Whose were the stupidities at home, or what were the disturbances abroad which exposed sterling to these vicious attacks?

Mr. Selwyn Lloyd: I have the text of what I said with me. I said that
disturbances abroad or stupidities at home can affect exports.

Mr. Houghton: I was quoting from the report in The Times of 1st May. I acknowledge that the Chancellor said, "can affect exports". He was referring to stupidities and disturbances in a much broader context than that. In any case, the right hon. and learned Gentleman was speaking as if he were a kind of war correspondent watching the battle through field-glasses and shortly afterwards he spoke as if he were the victorious commander-in-chief. The battle of the last fifteen months has been won, he declared, in accents indistinguishable from those of Lord Montgomery.
If that is so, what is much of this Bill about? Why Clause I, for example, with its provision for more manipulative

surgery? That certainly brings me to the Bill, on which I wish to make some comment. [HON. MEMBER: "Hear, hear."] I can go on on these other matters as long as the Attorney-General wishes, but there is something to be said on the Bill.
Clause 1 is the cornerstone of the Bill. This is where the Chancellor is seeking fresh powers to increase taxation by Orders of the Treasury. All the complicated stuff about the short-term capital gains tax is window-dressing and this is the guts of the Bill. Quite frankly, the tax on short-term capital gains, so long as it facilitates the work of the Trades Union Congress on the National Economic Development Council and appeases the trade unions and the discontent of many people about capital gains, will have served its purpose. The Chancellor himself does not know what yield he will get, but here is a power to levy additional taxation over a very wide front.
The Chief Secretary said that there had been no serious criticism of the regulator. He referred to a comment which I made about it and went on to say that he found it difficult to understand the criticism which had been expressed about the use of this regulator. I expressed criticism about this in the speech I made during the Budget debates. I must return to that. I do not think it is just a "bee in my bonnet", for there is a very important question of principle in the use of a regulator of this kind when put into the hands of the Chancellor of the Exchequer. What I complained of is reported in column 1517 of the OFFICIAL REPORT for 12th April. It is that last year the Chancellor asked for powers to increase or to reduce indirect taxes by an amount of up to 10 per cent. of the tax.
That was to enable the right hon. and learned Gentleman to apply the brake to excessive home demand or to stimulate consumption as circumstances required. By means of this regulator the Chancellor could raise the taxes above the level of April, 1961, or reduce them below the level of April, 1961. The whole point of the regulator as the Chancellor presented it to the House was that it should work either way. In the event, the Chancellor came to the House before


the ink was dry on the Finance Bill to ask for sanction to the Order imposing the surcharge up to the maximum under Section 9 of the Finance Act, 1961. That Order was due to expire on 31st August this year, or at such later date as Parliament may decide.
In this year's Bill the Chancellor had several courses open to him. First, he could have let the Order lapse at the end of August. Secondly, he could have asked for an extension of the life of the regulator. Thirdly, he could have asked for more room for manœuvre either way by some extension of the limits of surcharge or rebate beyond 10 per cent. Had he taken the last course, it would at least have preserved the balance of the see-saw. He would have retained the power to reduce these taxes by just as much as he increased them.
But what has the Chancellor done? He proposes, first, to consolidate the existing surcharge increases with the substantive taxes, and, secondly, to ask for a new regulator to increase them by a further 10 per cent. with power also to reduce them by 10 per cent. But this means that while he will have power to increase these taxes by a further 10 per cent., making 20 per cent. in all over the levels of April, 1961, his power to reduce them will be curtailed. It will be confined to 10 per cent. of the new and higher level of permanent taxation. In other words, he can do no more under the proposals that he has put to the House than to put these taxes back to the April, 1961, level, while having power to raise them to a total of 20 per cent. above the April, 1961, level.
I think that the Chancellor has forsaken an important condition that he laid down when asking for these powers last year, namely, that he could move the same distance either way. He now proposes that he shall be able to move a total of two steps forward, but only one back. With respect, to my simple mind this is a twist. It is as bad as anything that we have had from the Minister of Pensions and National Insurance, who is the master player at a game of snakes and ladders.
The Chancellor is showing his interest only in increasing taxation by a device which the House gave him on trust last year. When I mentioned this criticism

during the Budget debates, the Economic Secretary made what I thought was a disingenuous reply. Referring to me, he said:
He complained that my right hon. and learned Friend had allowed the surcharge to lapse and had now consolidated part of it. He thought that this was an abuse and would bring discredit on the regulator. It was, quite genuinely, precisely because my right hon. and learned Friend did not want to abuse the regulator that he proceeded as he has done. [Laughter.]"—[OFFICIAL REPORT, 12th April, 1962; Vol 657, c. 1528.]
It is not often that the word "Laughter" is put in the OFFICIAL REPORT, there must have been quite a lot of it, and I understand that there was.

The Economic Secretary to the Treasury (Mr. Anthony Barber): Read on.

Mr. Houghton: There was laughter at that point, and the hon. Gentleman said that he could not understand why. I will pursue this matter more closely later.
If the hon. Gentleman wants me to continue in this theme, may I refer him to the letter written by Lord Derwent in The Times of 1st May. He shares my criticism of the use of the regulator. After the first year's experience of a new and novel device in a Finance Bill, I think that it is important to examine carefully how it has been used, because precedents are going to be set for the future.
I now come to Clause 3 and that part of it which is commonly known as "taxing the lolly." Here, I think that hon. Members on both sides of the House will be disturbed to read news about the price increases in the confectionery industry. I am sure that hon. Members will have read the leading article in the Guardian of 2nd May. In some cases it is the fractions which are being blamed for the difficulty of adjusting retail prices, but in other cases it looks as though this is being used as an excuse for increasing the profit margin.
How little consumers know about profit margins, and how much more they ought to know about them. It is said that when a tax is raised on many brands of goods the manufacturers, or the wholesalers, or somebody, add the profit margin to the tax and, therefore, have a vested interest in a modest increase


in taxation because they can increase their profit margins when that is done whereas otherwise they would have little excuse for doing it. All these things are costed, and I think that when prices are increased firms should be encouraged to let the public know why the increase is necessary, and exactly what they are paying for in the structure of the retail price.

Mr. A. Lewis: My hon. Friend is aware of the interjection I made, that one of the largest sweet manufacturing firms in the country—in fact, the firm is in my constituency—has said that it can and will cover this increase itself and not pass it on to the public, because it can meet it out of profits. If one of the largest firms can do this, the other large firms should do the same.

Mr. Houghton: I would not sit in judgment on all the firms concerned. There are both saints and sinners in the confectionery industry. The firm referred to by my hon. Friend is obviously one of the former, but there are some sinners, and they are referred to in the article in the Guardian. In a broad approach to this Clause one has to sound a warning note about the extension of indirect taxation, and one wonders whether this new percentage tax may later be the foundation for more taxes at the 15 per cent. rate. Those now below may be lifted to this new floor.
That brings me to Clause 6 on Purchase Tax, in which the Chancellor proposes to reduce the weight of tax at the top and broaden the base of tax at the bottom. Among the reasons he gave for "grasping the nettle" was:
… I believe that we must begin to reform the structure of Purchase Tax, particularly if we are to go into Europe. I therefore intend to reduce the spread, or limits; of the rates."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 991.]
I think that we are entitled to know more of what is going on here. Is this the thin end of another wedge? Has the Chancellor in mind Article 99 of the Treaty of Rome, which refers to the harmonisation of indirect taxation? It says:
The Commission shall consider in what way the law of the various Member States concerning turnover taxes, excise duties and other

forms of indirect taxation … can be harmonised in the interest of the Common Market.
The Commission shall submit proposals to the Council which shall act by means of a unanimous vote …
That is of great importance in this connection, because Britain appears to have the highest level of direct taxation of any of the Six, but the lowest indirect taxation of any of them.
I have here the figures. United Kingdom—direct taxation, 47 per cent.; indirect, 53 per cent. Belgium—direct taxation, 42 per cent.; indirect, 58 per cent. Germany—39 and 61 per cent. respectively. Italy—26 and 74 per cent. respectively. France—24 and 76 per cent. respectively. Those figures exclude social security contributions in all cases.
This seems to be of growing importance as we get nearer to Europe, and when the Chancellor makes specific reference to preparation for entry to Europe, I think that we are entitled to know a little more of his intentions. The right hon. and learned Gentleman went further. He referred to the growing unpopularity of the turnover tax in some of the Common Market countries, and it may be that the Chancellor is getting ready to move towards the French idea of an added value tax. These are important matters in connection with the future structure of our taxation.
When the Chancellor of the Exchequer grasps the nettle partly in the name of going into Europe, he should tell us where he thinks we are going—

Sir C. Osborne: Into Europe.

Mr. Houghton: I mean where we are going on taxation.

Sir C. Osborne: The hon. Member did not say that.

Mr. Houghton: Any move to increase the burden of indirect taxation would be contrary to the concept of fair taxation held by my right hon. and hon. Friends. We stand for a fair and progressive system. We certainly did not contemplate that any revisions of the structure or incidence of Purchase Tax would lead to fresh impositions on erstwhile tax-free goods or an increase in the lowest existing rates of Purchase Tax. This is a step in the wrong direction from our point of view.
I pass to Clause 8—Increase of reliefs for small incomes. As I said in my speech in the Budget debates, we were shocked last year when these most pressing reforms were rejected by the Financial Secretary. We asked in regard to age exemption for precisely what the Chancellor of the Exchequer proposes in Clause 8, that is, that the £275 for the single person over 65 should be raised to £300 and the £440 should be raised to £480 for married couples. If the Financial Secretary and other hon. Members interested wish to read the Financial Secretary's reply to the debate on 14th June, they will see the paltry grounds upon which these proposals were rejected last year, only to be adopted a year later.
As regards the small incomes relief, last year's performance is the more astonishing, because we proposed to raise it, I am surprised to find, only from £300 to £325. That was dismissed by the Financial Secretary as being not particularly strong, but now he proposes to raise it to £400. We all have great affection and respect for the Financial Secretary, but he will get his nose rubbed in this a little further in Committee.
While on this matter, I should explain that we on this side of the House think that proposals should be put into the Bill to exempt all small incomes up to the previous limits for age relief, namely £275 for the single person and £440 for married couples. A step has already been taken to lift the Estate Duty exemption on small estates and we think that there should be a corresponding relief of Income Tax on small incomes.
We also have some strong feelings about the main personal allowances. The present personal allowances of £140 for single persons and £240 for married couples have remained as they are for seven years. In 1955, just before the General Election, these allowances were last increased. In 1959, again just before the General Election, the then Chancellor of the Exchequer said that it was the turn of the standard rate, so he slashed it by 9d. Last year when we on this side thought that it should have been the turn of the main personal allowances the present Chancellor of the Exchequer decided, since it was not on the eve of an election, that it was the turn of the Surtax payers.
Looking back on last year and the Surtax reliefs in the context of the economic situation of last year, when sterling was fighting for its life, there has been nothing more brash or brazen in recent years than those proposals in last year's Finance Act. This year Clause 8 concedes only the smallest, though admittedly the most pressing, reliefs to aged people and others on small incomes. We shall have more to say on this later.
I turn to Clause 22 dealing with small estates, to which I have just referred. It was a Labour Chancellor of the Exchequer that raised the exemption limit to £3,000 more than a decade ago, so no one can criticise the Government for being in too much of a hurry to carry that reform a stage further.
We welcome Clause 23, which closes the foreign land loophole, which I understand had become little short of a scandal. But the Chancellor of the Exchequer should not have stopped there. I know that the Economic Secretary reads the Statist. I hope that the Chancellor does, because there is a contributor to that paper on various taxation matters whose point of view comes very close to that held by my right hon. and hon. Friends, though even from our point of view we should regard "Wycliffe" as an extremist.
I understand that he is not a Communist but a disillusioned Conservative who is thinking of voting Liberal. He says in the Statist of 27th April:
There is a cancer on our business life which some government some day must have the courage to cut out. It is the persistence of substantial economic power in the United Kingdom by people who have inherited money and not made it themselves. It is notorious that Estate Duty is a voluntary tax and has been utterly ineffective in pruning the colossal fortunes of the Great Estates both commercial and landed.
I am not sure that I would agree that Estate Duty is entirely a voluntary tax. If it is, there were quite a lot of volunteers to provide the Chancellor with £260 million last year. Either they intended that he should have it or death overtook them before they made alternative arrangements.
There are two serious points here which I think the Chancellor should attend to. One is transfer of assets on marriage. The other is the persistent


misuse of gifts inter vivos. If, as "Wycliffe" says, he could transfer Blenheim Palace and £1 million with it, if he had it, on the marriage of his son and it would all be Estate Duty-free if he died next day, it is surely something which needs a remedy. We on this side think that these two points should receive attention. If they are not attended to by this Government, they will certainly have to be attended to by a Labour Government.
I come now to Part II, Chapter II, dealing with the charge on gains from acquisition and disposal of assets. I suppose we ought to find a name for this charge, or is Case VII, Schedule D, to be it? It is not very poetic, but the Chancellor disclaimed any suggestion that he was introducing a capital gains tax, so we cannot call it that. However, Case VII will do for the time being.
We on this side welcome this, but why so late in the day? It should have been done years ago when we think of the capital profits that people have got away with without paying any tax at all on them. We on this side believe it to be right to tax short-term gains as ordinary unearned income. Where does the idea come from that there should be earned income relief for this tax? A contributor to the Investors Chronicle of 27th April, Mr. Alun Davies, in an article headed, "The Mouse that Roared"—he is not referring to the Chancellor, but to the tax—says this:
There is one amazing omission from the Finance Bill. No earned income relief is to be allowed against profits from speculative gains. Some of the arguments in favour of earned income relief have become very corny in the fifty years or so since it was first granted. Suffice to say that there are many types of income on which earned income relief is granted which are earned with much less sweat, blood, and tears and ulcers than many capital gains.
There is some income now getting the benefit of earned income relief which should lose it. We on this side would certainly not agree to earned income relief being given on this tax.
The next question is whether six months is short enough to distinguish between certain short-term gains and others. Some countries have six months, some a year. Since the Budget, I see that the Indian Finance Minister has proposed a year as the period for short-term capital gains to be taxed at the normal Income Tax and Supertax rates.

The test of all this is to try to see what the tax is all about. Surely, it is to judge what a person can afford, and what, in relation to other taxpayers, he can be fairly asked to pay towards the national expenditure. It is a test of taxable capacity.
I agree it is not the only test. There are social, financial and economic considerations which have to be weighed and taken into account, but, in principle, so far as principles go in these matters, nothing is logically or necessarily exempt from taxation. Tradition comes into it as well, and the national temperament and outlook also come into it. Some of our taxes are penal and some are puritanical. This is largely because of the way we have adjusted ourselves to the tax system that we find bearable and which we more or less willingly accept.
We have four main groups of taxes: first, Pay-As-You-Earn; second, pay-as-you-make; third, pay-as-you-receive; and four, pay-as-you-spend. Surely the realisation of capital profits can find a place among them. It seems contrary to all concepts of the fair distribution of direct taxation to say that the proceeds of overtime, shift work and danger money are taxable income, whereas the proceeds from a lucky break on the Stock Exchange are not.
Looking at the case for long-term capital gains being taxed—though at a diminishing rate to take account of the period of accrual—why should they go scot-free, when the higher earnings of a professional man, gained as the result of years of study, practice and skill, do not? These are issues of principle in relation to our taxation system. The truth of the matter is that for far too long we have had an exaggerated sense of the sanctity of capital and the rights of property, and that is at the root of the matter. Regarding taxes on income, the narrow base of our Income Tax system was devised in social and economic conditions very different from those of today.
It has been said that if we were to tax capital profits, even long-term capital profits, it would discourage investment. Why should the taxation of long-term capital profits discourage investment any more than the taxation of income discourages work? These


things have to be equated m terms of fair sacrifice. I think we have to adopt the simple doctrine that anyone who says that his capital gains should be tax-free, while an ice cream cornet should not, should have his brains examined, because it seems to me to be about as simple as that.
There will be many issues in connection with this new tax which the Committee will wish to consider. I am not convinced about the way it is proposed to deal with bonus shares and "rights" issues. A bonus issue, by itself, will still not be taxed. Moreover, if the bonus shares are sold they will be regarded for Case VII purposes as if they had been acquired by the seller when he acquired the parent shares, which means that the bonus issues may be saleable on the following day and no short-term capital gains tax will be payable. The acquisition of rights issues is apparently to be treated on a similar basis, and this is probably where the loopholes are to begin.
The Chief Secretary has already referred to this curious anomaly in regard to switching operations by the proprietary and mutual life offices. I am sure that the Chancellor would not expect me to sit down without asking him one question, which perhaps I am pretty well qualified to ask. Who is to do all the work? What is the condition of the Inland Revenue to deal with this new tax at the present time? What preparations is the Chancellor making so that the Inland Revenue can discharge these new responsibilities? The staff are already behind with their work on Income Tax, and there are plenty of arrears hanging round. Staff is short, and the work already presses. I hope the Chancellor means to pay attention to getting the Inland Revenue house in order to do this new job.
That is where I propose to leave the Finance Bill until we come to the Committee proceedings. The House knows that this Bill is not the whole of the Budget, and the whole of the Budget is not the whole of the story. This is merely the fiscal framework within which the nation must go about its daily work. It is the response of the people to the events, conditions and challenges of the hour that really decides the future

of our country. It is the Government, and not the people, who have blown hot and cold and dithered and slithered along, boosting us at election times and belting us immediately afterwards. That is why the Government are fast losing the confidence of the nation. People know that the Government have led us up the garden twice before and are now getting ready to do it again.
How can this Government recall the British people to a stern sense of duty when they have dissipated the natural desire for service and self-sacrifice in so many different ways? Ten years of Toryism have damaged our prestige abroad and weakened our resolve at home. They now know that they are under notice to quit. They sit there, looking dejected and helpless—[Laughter.]—like a lot of Micawbers—[Laughter.] This is the first sign of cheerfulness there has been this afternoon.

Mr. William Ross: They are whistling in the dark.

Mr. Houghton: They are sitting there like a lot of Micawbers waiting for something to turn up. The Chancellor is waiting for the tide to turn, but, surely, hon. and right hon. Gentlemen opposite know their fate? They are not waiting for something to turn up; they are waiting to be turned out.

5.18 p.m.

Mr. Nigel Birch: If the hon. Member for Sowerby (Mr. Houghton) detected deep depression on this side of the House, he would have detected it on my face. My heart always sinks when the hon. Gentleman gets up to speak, and When he promises passion and excitement in his speech my heart sinks lower still. We got from him, as we always do, the usual actions of the bloodsucker's bulldozer approach to economics as he hacked his way through a long Bill like this. I must confess that it depressed me very much indeed.
When I saw the right hon. Member for Battersea, North (Mr. Jay) sitting beside the hon. Gentleman, I very much hoped that he intended to speak. It is true that he has made the same speech on finance for many years now, but he does it very well. He has grace. He increasingly reminds me of that beautiful but now, I fear, almost extinct animal,


the high-stepping hearse horse. To see that animal go through its paces is a pleasure, compared with watching a bulldozer.
In the few remarks I shall address to the House, I shall discuss our economic position. That has generally been done on the debate on the Finance Bill, because we have all the time in the world to discuss all these dreary little Clauses, and we shall take all the time in the world, I have no doubt, to do it. We shall have many chances of hearing the hon. Member for Sowerby discourse at whatever length he fancies and at whatever hour of the night.
What I should like to say at the outset is that I entirely approve of the general shape of my right hon. and learned Friend's Budget. I think he was absolutely right in what he has done, and I do not see that he could have done anything else, if he accepted the figures which he was given. Nobody knows, of course, what will happen, but my right hon. and learned Friend has the best information available, and I do not think that his advisers would be likely to alter their estimates now from the estimates they made when he constructed his Budget.
In thinking about what we can do, there are two points in the economic context which must always be grasped firmly. The first is our reserves position. In this country, we have quick liabilities of more than three times our quick assets, whereas in the Six the position is very much the other way round; they have quick assets five times as great as their quick liabilities. This sterling balance position was inherited from the war and it is not very easy to do anything about it. It is a problem that may, in the very long run, be alleviated by entry into the Common Market, but we certainly cannot rely on that yet.
The second point is this. I am sure that Mr. Per Jacobson was right, when he said a year or two ago that world post-war inflation has come to an end. Therefore, we shall not be floated off the rocks by the rising tide of inflation elsewhere. To me, that seems to demand caution. As we have seen many times, it is very easy—and quite quick—to reflate our economy. What is extremely difficult to do—at any rate, to do quickly—is to deflate it once we

have it going at too great a pace. It is very easy for us to make one-way mistakes that are not reversible; the sort of one-way mistake that we made that was not reversible was the 1949 devaluation, from which we still suffer. So I would say that caution must be our watchword.
What I very much approve of in my right hon. and learned Friend's Budget is that he has got what I believe in the present circumstances to be the right balance between fiscal and monetary measures. There has been a tendency in recent years, when there has been a need for reflation to produce it by a reduction in taxation, but when there has been a need for some deflation the tendency has been not so much to increase taxation as to try to make monetary policy bear the whole weight.
It is perfectly true to say that this has been advocated by a great many economists. I do not mean the deprived creature who writes the leaders in the Economist, but many quite distinguished economists. It is a politician's dream, of course, to be told by economists of repute to do something which exactly suits him politically, but the real trouble about it is that one cannot go on doing it forever, because there comes a time when the nerves of the bond market break and one gets into a position where there is no reason why there should be any real limit to the rise in interest rates.
Today, in many South American countries the going rate of interest is 25 per cent., and probably if one can get the money at that price it is a gift. Unless we pull ourselves together that sort of situation could just conceivably arise here. As Mr. Harold Wincott has said, Keynes is all right provided only Keynes knows the rules, but the point is that everyone now knows the rules, and knows what happens to prices and the value of money if we overplay the Keynesian technique.
Some hon. Members may have read a letter in The Times the other day by Professor Lipsey in which—I do not wish to misrepresent him—he appeared to advocate a state of permanent inflation. He seemed to say that everything would be much easier if Ministers would not accept the obligation to try to preserve


our currency and try to prevent devaluation. I think that it is fair to say that, to a certain extent, he guarded himself against criticism by employing the argument of the housemaid's baby. Hon. Members will remember that the housemaid's baby was illegitimate, but that she said, "After all, it's only a little one."
The question I would put to Professor Lipsey is this. If Ministers of either, or any, party followed that policy, once they divested themselves from any real responsibility for the currency would Professor Lipsey be willing to put his?own savings into long-dated Government securities. I suspect the answer is "No." If it were "Yes", I suggest that it would clearly be the duty of this House to set up a Royal Commission at once to examine the distribution of university grants. However, I suspect that the professor's answer would be "No"—but why should he expect anyone else to do so, and what happens if they do not?
Building societies are sometimes discussed in this House—I think that they were discussed yesterday. Building societies are non-profit-making bodies and draw their deposits from and grant their loans to people, I would guess, in much the same income band. At the moment, building societies cannot get enough money to meet the demands made upon them and, at the same time, the people who borrow the money complain very much about the high rates of interest they have to pay. But let us reflect for one moment who has come off best: those who have succeeded in borrowing the money, or those who have lent it. The answer, every time, is those who have borrowed. Their houses have gone up in value and the value of money has gone down.
We will not be able to finance any of these things unless we can get some confidence in long-term interest securities. I do not believe that we can run a sophisticated and civilised economy without some confidence in the bond market. We are beginning to get that confidence back. Over the last few months there has been a very considerable degree of increased confidence. Prices are beginning to creep up, steadily, as they should do, and there

really seems a chance that we might get things right now.
That would help immensely another difficult problem, that of municipal finance. Some hon. Members may have noticed that the City Treasurer of Manchester read a paper the other day in which he pointed out that local government obligations of one year or less are as much as £1,000 million at present, and that no less than £500 million is at seven days' notice or less. He said that some authorities known to him have as much as half their loans in very short maturities.
That must be wrong, for two reasons. One ought not build a sewer to last for forty years and borrow the money at seven days. The thing is utterly unsound financially. But the mischief does not end there. The local authorities seven-day money is becoming a feature of the international money market. A lot of the foreign money coming here goes into local government seven-day obligations. That weakens the control of the authorities over the money market at the very moment when, for the first time since the war, they were really getting that control back again.
The last point to note is that the ordinary muncipal treasurers are not at all well fitted to deal with the long-nosed gentlemen who move money all round the world, and they constantly miss the point. They are ignorant, they are too busy—in some cases they are even idle. I am sure that if the Chancellor made an inquiry he would find many cases in which a local authority had bororwed seven-day money and had just simply gone on at the wrong rate when it could easily have borrowed at a lower rate. They have just gone on with it; it is not their stuff to watch the international money market. They do not understand it, they are too busy or, as I have said, they are, perhaps, too idle. The long-term remedy is to introduce legislation to lay down that local authorities shall not borrow more than a certain percentage of their debt on very short terms. I believe that we shall have to come to that.
But on the gilt-edged market as a whole, surely everything depends on the maintenance of confidence. We hear a great deal about stop and go. I believe that in our circumstances, our financial


position wants to be consistently strong, not strong at one time and weak at another. The fiscal policy of both Germany and Italy in recent years has been consistently tough all the time. If people once knew that our fiscal policy would be consistently tough, then something vastly important would happen.
At the moment, in the forward calculations of employers, investors and trade unions there is always the assumption that inflation will go on. Once that assumption ceased to be made I believe that we should find business men a great deal more energetic and fairly pushing round to get on with things. We should find investors unable to make profits without taking commensurate risks and trade unions sensible enough not to press their claims faster than the traffic would bear. Once the idea got about that people were not going to be baled out by inflation the whole atmosphere would change.
One may ask, does not this mean high taxation? It does mean that; if we spend a great deal of money we have to tax heavily. If we had this change and if people realised that we were always going to be tough, business men more energetic and trade unions more reasonable, then we should get far faster growth. But there are two things which we could do and which are partially being dealt with at the moment.
First, on the financing of nationalised industries. I very much doubt whether the public altogether realises how great a burden the financing of the nationalised industries puts upon the country. It is not only the losses which they make-though they are large enough—it is the fact that we have to find several hundred millions of pounds of long-term money every year for tehir capital expenditure. That would be all right if there were people with several hundred millions of pounds waiting and yearning to buy these Government securities. But the whole trouble is that they have not been, and that is why so much money has had to be raised by taxation.
Hon. Members may have read Sir Oliver Franks's last speech as Chairman of Lloyds Bank. In it he said he thought that in this country, far more than in other countries, we tended to look less at whether things made sense

economically and more at other considerations. Let us look, for instance, at what happened in the coal trade since the war. Up to a short time ago—it may still be true today—mines were still being worked which were losing £10 on every ton of coal produced. Millions of pounds were put into mines that could never pay.
Those people fond of reading horror comics may have read a report of the Select Committee on Nationalised Industries' inquiry on the electrification of the main line between Manchester and London. There seemed to be absolute insanity in the way the thing was done. Surely, it is essential that nationalised industries should only invest money if there is the prospect of a return. If we want to do something for social reasons, then we should say that it is for social reasons and put it straight on the Budget. Otherwise, we must not invest loosely.
The other thing about the nationalised industries is that where it can be done, as in the case of electricity and gas, they ought to find more of their capital out of their profits, as private industry does. The other direction in which we have wasted money is in bolstering up declining industry. Surely, if we want to put Government money into an industry we should put it into an expanding industry, instead of into cotton and into—thank heaven it did not come off—the Cunarder. Surely we must act in ways that make economic sense. We should find things much easier if we did, because these mistakes in themselves constitute a hidden reserve. If we put them right we can go ahead. It is not so much that investment has been deficient but that it has been misdirected.
Turning to some of the criticisms made of my right hon. and learned Friend's Budget, I do not think that we need pay too much attention to the criticisms of the Opposition. They are always the same. The Opposition want to spend more money and they vote for a reduction of taxation. They want to feather-bed the nationalised industries and fuddy-duddy the economy.
The hon. Member for Cardiff, South-East (Mr. Callaghan) is less skilful in thinking up high-minded reasons for doing himself a good turn than is that


crystalline fountain of honour the right hon. Member for Huyton (Mr. H. Wilson). There have been criticisms from people who ought to know better, and most of them imply that we ought to be running the economy flat out. With unemployment at 2 per cent.—there is always concealed unemployment as well—we really cannot thrust our foot down on the accelerator now without running the most enormous risk.
Than my right hon. and learned Friend was criticised for not saying more about the Common Market in his Budget speech. What would have been the good of that? It would have been childish. He was also criticised for not setting higher targets. I am always sceptical about setting targets.

Mr. James Callaghan: What does the right hon. Gentleman believe in? Anything at all?

Mr. Birch: I do not believe in the hon. Member for Cardiff, South-East. He cannot understand even yet the difference between c.i.f. and f.o.b. If we set a general target it has very little meaning, and if we set specific targets they are very often wrong and misleading. [Interruption.] If the hon. Member for Cardiff, South-East is listening, I will point out to him—[HON. MEMBER: "Order."]
Hon. Members opposite, including the hon. Member for Cardiff, South-East, may remember that in the first economic White Paper which they published they set a great many targets. There is nothing new about this. And in the second White Paper they had an appendix called "Fulfilment of the Plan". That was wildly out. It reminds me of the late-lamented Harry Tate sketch on selling a car. He had not a very good oar to sell. A prospective purchaser said that he would like to go for a drive and Harry Tate asked where to. The man replied, "Say, Folkestone", and Harry Tate said, "There is no harm in saying Folkestone". Then the car fell to pieces.
One of the troubles about setting specific targets is that one gets them wrong. I would bet a large sum of money that if target setting had been in fashion six months before the oil tanker freight market broke a very high target

would have been set for the building of oil tankers which would now have been laid up.
Surely, we must create an economy in which growth can proceed. Let that growth take place and then distribute the money that we have earned. I believe that my right hon. and learned Friend is right not to sell the truth to serve the hour. I think that he will succeed. He deserves our support, and he will get mine.

5.40 p.m.

Mr. Bruce Millan: The right hon. Member for Flint, West (Mr. Birch) started his speech by complaining about the amount of detail given about the Finance Bill by my hon. Friend the Member for Sowerby (Mr. Houghton). But I think that if any complaint about too much detail is to be laid against anyone, it should be laid against the Chief Secretary to the Treasury, who treated us to a considerable amount of detail about some matters which are not of very great importance at all and completely failed to explain some things which are extremely important. I intend to devote my remarks more to the Finance Bill than to the economic situation, but I should like to take up a couple of points raised by the right hon. Member for Flint. West. The right hon. Gentleman always speaks extremely impressively—

Mr. Callaghan: No.

Mr. Millan: There is a qualification. At the end of his speech—

Mr. Ross: The right hon. Gentleman is more at home on a grouse moor.

Mr. Millan: Mr. Millan —one has a great deal of difficulty in understanding what it was all about, and I think that his speech this afternoon was typical.

I take one example, that of municipal borrowing. There is a simple answer to the difficulties of municipal authorities and about borrowing short-term, seven-day borrowing and the rest. The answer is to revert to the previous system under which they could borrow long-term from the Public Works Loan Board. It is as simple as that.

Mr. Birch: Will the hon. Gentleman give way?

Mr. Millan: No, I shall not give way. The right hon. Gentleman addresses us with a considerable amount of insulting comment and, in those circumstances, I see no reason why an hon. Member on this side of the House should give way to him.
The other point to which I wish to refer relates to the question of bolstering declining industries. I agree that it is extremely foolish to spend large sums of Government money, or any other money for that matter, on bolstering up declining industries. But the great difficulty about avoiding that, and the great difficulty about adopting a policy of supporting only the new and the modern, is that the Government's distribution of industry policy is not tough enough.
It is no use going to areas already suffering from a considerable amount of unemployment—Scotland is one such area—and saying to the people there, "We cannot afford to bolster up the shale oil industry and the coal mines of Scotland", and so on. The people will not accept that argument—and rightly so—until the Government have revealed a much tougher policy and made more emphatic progress with the distribution of industry. Once the Government do that; once these depressed areas have the same opportunities available to them as are available to the rest of the country, there will be no difficulty about getting rid of inefficient industries or allowing them to run down and giving whatever Government assistance there is to new and developing industries.
I turn now to the Finance Bill. This afternoon there has been a certain amount of argument about the question of balance between direct and indirect taxation. We on this side of the House, by instinct, are in favour of direct rather than indirect taxation. But saying that does not completely dispose of the argument. I know that it is important to look at each category of taxation and to see what is happening in detail within the categories. It is no answer to the criticisms which we have made about the unfair sharing of the burden of taxation to say—as the Financial Secretary to the Treasury continually says—that the proportion of taxation represented today by direct taxation is roughly the

same proportion as was represented in 1951.
When we look at each of the categories of taxation we see that, while the percentages of the total may be the same, in fact the burden has been spread in an entirely different way. Particularly over the last couple of years the emphasis has been towards spreading the burden more unfairly. In one degree or another we all pay both direct and indirect taxes. It is by no means true that only the rich pay taxes directly and only the poor pay taxes indirectly. Unfortunately, whether we like it or not, quite poor people pay taxes directly as well as indirectly.
Regarding direct taxation, one of the important things which we ought to be discussing in the context of this year's Budget is the Surtax concession given last year which operates this year. It is not possible to discuss the direct tax changes in this year's Budget without also taking into account the very substantial Surtax concession which was given last year. Concerning direct taxation, this is really the only substantial thing which has happened in the two years taken together. The other proposal, that there should be introduced a speculative gains tax, we shall be able to deal with in detail during the Committee stage discussions on the Finance Bill.
No one seriously considers that the introduction of this tax will do anything at all towards ensuring a fairer distribution of tax liability among the people. The Chancellor himself has said that the reason for introducing a speculative gains tax is not primarily one of obtaining a yield from it. It is designed to remedy certain injustices, and our criticism of the whole concept of the tax—which we shall be able to elaborate during the Committee stage of the Bill—is that it does not remedy real injustices at all. In fact, ultimately and fundamentally, this capital gains tax is a piece of window-dressing which will prove completely ineffectual. The only good thing which we can say about it is that some of the hack technical work has been done which will provide the basis for the introduction later of a real and thorough capital gains tax.
There is another aspect of direct taxation on which the Government are


open to criticism, and I was glad that my hon. Friend the Member for Sowerby mentioned it. I refer to the question of Estate Duty. We have an Estate Duty which is imposed under undesirable circumstances. It is apparently a high and even a punitive imposition, yet the yield from this tax is completely out of accord with the rates for the simple reason that Estate Duty can, to a great extent, be avoided. It is true that anyone, with the minimum of effort, can avoid paying Estate Duty, or can avoid paying it in large quantities. It would be much more honest and straightforward to have lower rates of Estate Duty with all the loopholes blocked up, which would give a yield something like the yield we get at present. In fact, that could be done. I am not suggesting that the rates should be lowered, I do not want them lowered. But I should like to see the loopholes blocked up; and if we are to have the same yield from Estate Duty as at present under the present Government, we ought to have an honest duty and not a continuation of the present dishonest situation.
The Government's answer to this kind of criticism is, normally, that incentives have to be provided; that we on this side of the House are concerned with punitive rates of taxation—I wish to say a word about that later—and that the Government are concerned with giving people incentives. But what the Government fail to realise is that it is not just a question of the kind of society to which incentives should be given and giving incentives to a small number of people. If we are to have incentives, we should consider the taxpayers as a whole and not just the 300,000 Surtax payers who were given an incentive in last year's Budget which economically, has had no result up to the present. In fact, if we consider economic progress as a cause for the Surtax concession, we can come to the conclusion that the Surtax concession has been a disincentive over the last nine months rather than an incentive.
Apart from the concession to Surtax payers, there are all sorts of people who require some incentive at the present time, and that is particularly so with regard to people who have very small incomes by current standards. The ordinary single person with an income

of £5 15s. a week, for example, now pays no less than 5s. a week in Income Tax. Should he be paying any Income Tax at all? The married man with £8 10s. a week pays 6s. a week in Income Tax. Should he in present circumstances be paying any Income Tax at all? We say quite categorically that he should not, that incomes of this sort are already low enough in all conscience, considering today's cost of living, and there should be no taxation on them at all.
There is taxation on such incomes, of course, because successive Chancellors of the Exchequer during the past few years have adopted a very simple device for bringing within the taxable range people with small incomes, the device of not increasing the personal allowances according to the changing value of money. Personal allowances have not been increased since 1955–56. During the last seven years, there has been a considerable reduction in the value of money, and the ordinary single person's personal allowance of £140, as it was in 1955, is worth considerably less with today's cost of living.
It is very easy for the Chancellor in this negative way, since he is not positively putting taxes up, to increase his yield of Income Tax at the expense of people with incomes right down at the lowest level. This is what has been happening during the past seven years. The Chancellor has been able to say that he has not reduced allowances and he has not increased the standard rate, yet, at the same time, he has continually cut into the lowest incomes by the simple device of not increasing the personal allowances. It is a shocking situation that people with as little as £4 a week in the case of a single person and £6 a week in the case of a married couple should be paying any Income Tax at all in the current year. I hope that we shall be able to say something about this during the Committee stage.
There is another aspect of incentives which the Chancellor has completely neglected this year, as he did last year. What about capital allowances? What about investment allowances? We have had nothing from the Government on this subject this year or for a number of years. The right hon. Gentleman the Member for Flint, West spoke about not bolstering up declining industries. I


agree with that. But it is noteworthy that the only industry which is receiving specially favourable treatment in the matter of investment allowances now is an industry which is in difficulties, the shipping industry. It is not expanding. Very unfortunately, it is a declining industry. Again, the only industry which is specifically receiving preferential treatment in taxation this year is the shipping industry through the special provision which the Chancellor is making for the treatment of losses.
Support and preferential treatment is being given to an industry which, unfortunately, is declining. I am not necessarily against this. There may be very good reasons why, in certain circumstances, a declining industry should be given taxation support; but it is quite antithetical to the principle which the Government enunciate on other occasions, that they are all in favour of supporting the new, the progressive and the modern and not keeping in operation industries which really ought to go into a graceful, or graceless, decline. At the very least, the whole basis of capital allowances is certainly not favourable to new and expanding industries. I hope that we shall go into this matter very carefully on this year's Finance Bill.
The whole subject of investment allowances and capital allowances ought to be looked at. It ought to be rationalised. We ought to move towards giving quicker write-offs for capital allowances. There may be differences of opinion about how it ought to be done, but that is how we ought to be moving. The whole subject of capital allowances is a veritable jungle at the moment. It is ripe for rationalisation. If the Government really wanted to give an incentive to industry, there is no reason why they should not have done something about it this year, or, for that matter, many years ago.
We find the same pattern in indirect taxation, a gradual shifting of the burden on to the backs of the many. We have it in the consolidation of the Purchase Tax and other surcharges which were put on last July. We have it in the tax on confectionery. There is a very simple reason why the Chancellor chose confectionery, soft drinks and chocolates for Purchase Tax. There is hardly a commodity or group of commodities which ordinary consumers purchase which is

not already taxed. There are very few; indigenous fuel is one, foodstuffs are another. Fairly obviously, what the Chancellor did was to look at the list of untaxed commodities, and he chose the easiest one among foodstuffs, confectionery, soft drinks and chocolates.
We are entitled to know whether this means that his mind is moving in the direction of a general sales tax. I am not at the moment concerned with the theoretical arguments for a general sales tax but, from the practical point of view, with the sort of taxation system which we have, sales taxation would be regressive and we on this side would fight very strongly to oppose it.
In indirect taxation, the Chancellor has shown no discrimination whatever. His Budget this year does not discriminate between indirect taxation on consumer goods and indirect taxation which enters into the costs of industry. There is absolutely nothing about the diesel fuel tax for transport and nothing about the other various taxations which go directly into the costs of industry and which are directly inflationary. There has been no attempt to deal with these matters at all, and no attempt to discriminate.
It is very difficult to see any pattern at all in what the Chancellor has done in either of these branches of taxation except a pattern of gradually, though not imperceptibly, shifting the burden from the better-off members of the community to the back of the community as a Whole.
All one can say about the present Budget proposals, which have been completely unexciting, despite what hon. Members opposite say about them, is that they represent some sort of holding operation. But we are entitled to ask, a holding operation for what? They are not a holding operation, as the Chancellor has claimed, providing a firm foundation from which we can go forward with economic expansion. They are not a holding operation from the economic point of view at all. They are, or can be, a holding operation from the electoral point of view. It is difficult to see any pattern in the Budget unless one takes into account electoral considerations and the thought that we may have an election next year.
To put it in a sentence, we on this side of the House would like to see the


Government discriminating in favour of earners—I mean not just Surtax payers but earners as a whole—against those who do not earn their income. It is really as simple as that. There is no sign that the Chancellor is willing to do this. It would imply not only a positive but also a negative aspect, the negative aspect being a willingness to deal with things like capital gains, which, as I say, the Chancellor has totally failed to do this year.
This, I believe, is the current mood in the country at present. If it is of any use to hon. Members opposite, I think that this is one of the factors explaining why the Government are losing so much of their popularity at by-elections. Ordinary people looking at the Government's fiscal policy, their wages policy and their economic policy generally, have the clear idea that the Government are not so much concerned with earners as they are concerned with profit makers, dividend drawers and the like. They are absolutely right. It is one of the reasons why the Government are losing popularity. The mood of the country at present is certainly in favour of giving incentives to earners. We on this side are in favour of that, fiscally and in every other way. The emphasis of the Government, fiscally, by the wage pause and in other ways, is against the ordinary earners of this country.

Mr. David Webster: I have been following the hon. Gentleman with interest. Earlier, he was criticising the Government for not having more indirect taxation. Now he says that we should have more direct taxation. How does he square the two things?

Mr. Millan: I was saying that, on the whole, our emphasis on this side of the Committee is in favour of direct taxation rather than indirect taxation, but I was talking about direct taxation in the broadest possible sense. I was talking not only about Income Tax but about things like capital gains taxation and Estate Duty, which are direct taxation. I said at the beginning of my speech that it seemed to me that the balance between direct and indirect taxation was not so important as what happened within each category of taxation. The burden of my speech has been that in each category of taxation

the Government have been moving in the wrong direction.
Obviously, economically, socially and in every other way, what we can do by taxation is strictly limited, but, nevertheless, a considerable amount can be done in giving the greatest possible encouragement to the earners within our society, to the progressive forces. I am not talking about ordinary manual workers but about managements at every level. These are the people on whom ultimately the economy depends.
The Chancellor of the Exchequer has completely failed to give the necessary incentives and encouragement in this Budget. For that reason, it should be condemned, as it has been condemned, not only by hon. Members on this side of the Committee but also in the country by the electors.

6.3 p.m.

Mr. Julian Ridsdale: First, I wish to say to the hon. Member for Glasgow, Craigton (Mr. Millan) that the Budget has certainly not been condemned in the country. The theme of the speeches of the hon. Members for Sowerby (Mr. Houghton) and Cardiff, South-East (Mr. Callaghan) and of various other hon. Members on the benches opposite seems to have been, "Back to Socialism with a vengeance." I should have thought that one thing which the electorate had decided at the last few General Elections was that it did not want a return to Socialism.
It is surprising how, as soon as the warmer economic winds begin to blow, inflationists begin to spring up almost as plentifully as asparagus in May. That is why I congratulate my right hon. and learned Friend the Chancellor of the Exchequer, on producing for the second year running a balanced Budget and on restoring confidence in sterling and in the economic position of this country. I know that many people think that he should have done more for expansion, but I am sure that the action which he has taken, although in the short term politically unpopular, will, in the long term, be proved to be wise and correct and will give him much more ground for relaxation should the circumstances warrant it.
I like many hon. Members want expansion, but not at the price of inflation.


It is on this theme as the background to the Bill that I wish to speak. Before being to a degree critical of our investment policy over the last few years, I should like to point out that, certainly in the 1950s, the all-round record of our standard of living, and especially our employment record and attacks on poverty both at home and abroad were as good as, indeed better than, those of any other country in the world. While admitting these advantages, however, we must be realistic.
Let us admit quite frankly that other countries, such as Germany and Japan, have been putting investments into productive industry and plant and machinery as their first priority. And over recent years both sides of the Committee have made their first priority full employment and social progress. This policy has encouraged high incomes and spending, and being a debtor country with small reserves we have imposed strains on our balance of payment. In the E.E.C. countries the building up of capital and savings has had priority over everything else. Nevertheless, I feel that we have not been doing enough to give incentives to investment in the right industries and to ensure that the savings which have been made have been used correctly.
It is against this background that I view the Finance Bill and the Budget. These figures, when examined, are harsh and telling. Gross fixed capital investment in Germany, in 1959. was 27 per cent. of the gross national product compared with 23 per cent. in Italy, 21 per cent. in France, 31 per cent. in Japan and only 18½ per cent. in the United Kingdom. These are the latest comparative figures I have been able to obtain from the Treasury and, after all, in a matter like this it is comparative figures of investment which are important.
Mr. Oppie, in the Three Banks Review, stated that in the ten years from 1950 to 1960 total investment in machinery and equipment in the United Kingdom was 5·3 per cent. of the gross national product whereas in Western Germany it was 11·2 per cent. of the gross national product. This sort of investment meant that during the 1950s economic growth in Western Germany was nearly three times greater than it was in

this country. Investment certainly improved in 1960 and 1961, as the Chancellor told us in the Budget debate, but in my view it is still not adequate compared with that of our competitors abroad. I hope that when the Government spokesman replies at the end of the debate he will give us the latest comparative figures of fixed investment in relation to our competitors abroad.
When the Opposition say, "Why could not we have done this in the 1950s?", surely it is fair to point out that in the 1950s in Western Germany the rate of unemployment was such that there were two unemployed people for every unfilled vacancy, that there were 1 million unemployed people up to 1955 and 500,000 unemployed people up to 1959.
The share of wages in the gross national product in Germany greatly weakened the power of the trade unions, end, indeed, the closed shop is still illegal in Western Germany. For reasons like currency reform, bigger incentives to save and a vivid fear of inflation, the proportion of the gross national product which went to private consumption between 1950 and 1960 in Western Germany was 59 per cent. compared with 65 per cent. in this country. That, in my view, and, I am sure, in the judgment of all reasonable people, is why Germany was able to have a much higher rate of investment than we have been able to have in this county.
Now, for the first time, Western Germany is suffering from some of the full employment problems which we had to face in the early 1950s. I wonder whether her investment policies will continue from on the same scale as in the 1950s. I feel that she must be looking rather enviously at our gradually emerging incomes policy, for which the Chancellor of the Exchequer and the Minister of Labour deserve great credit, and at the new National Economic Development Council, which forms such an important background to the Finance Bill and to the Budget.
As the recent Report on O.E.C.D. states, which was underlined by my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) in his interesting speech in the Budget debate, what matters in incomes policy is mobility of labour. I hope that the Minister will


give that No. 1 priority in any reforms that he has in mind—although there is absence of direction in this context—in the Finance Bill.
Having made these points, I cannot help but ask: are we readly saving enough? Are we getting the maximum use of our scarce capital resources? Is there in this Budget and the Finance Bill this theme of urgency for investment running through the Bill? Certainly, the Chancellor can answer quite fairly that a lot lies outside the Bill. Is not one of the reasons for the lack of growth in our economy, as was stated so clearly and well by my right hon. Friend the Member for Flint, West (Mr. Birch), the inadequate return we have been getting from the capital invested in the nationalised industries, whose programme is now running at over £900 million a year, or one-fifith of our total fixed investment?
I do not want to deal too much with the nationalised sector of the economy or of public investment. I want to deal with investment in private industry as well. Tariffs, too, are not necessarily a subject for Clauses in a Finance Bill. I am certain that in the private sector, too, we have to see a much more flexible use of tariffs, so as to support those industries which help in our economy and bring more competition against others. I hope to see early action by the Chancellor in this field, even though he was not able to do anything about it in the Budget.
I suggested in July that we should not await the outcome of the E.E.C. negotiations for this. But if we do this, I think that we have to have much more of that old spirit that we had in England when we were a free trading nation of, "If it is best, buy British. If it is just as good, buy British. If it is not so good, then we should find out why and not be making it". Certainly though, we have to adapt our exports to foreign design and taste. But when tariffs come down we must resist the temptation to put too much strain on our import bill.
I wonder whether the Chancellor should not have armed himself with safeguard Clauses in the Bill in this respect. We can prevent too big a strain being put on our import bill largely by our own efforts, far better than by Government

import controls. I certainly do not rule out the possibility in the movement to lower tariffs of using, if necessary, some such weapons as the prior deposit system of import control being instituted.
Given these safeguards and more competition in the private sector, surely our first priority must be to channel more of our savings, much more than we have done in the past, into investment in the right manufacturing industries. Here, indeed, is the difference between the Opposition and ourselves. We do not want to see this done by enforced saving by the State, by the kind of public trading company which the hon. Member for Cardiff, South-East advocated in the Budget debate. We want to see much more encouragement given to the individual and his family to save and invest.
That is why I want to see less Government expenditure and more individual responsibility. I should like to see those who can afford it paying for more of their own benefits. I should like to see toll roads. It is high time that the Government looked at new sources of local revenue and relieved the growing burden of local government expenditure which is put on the Exchequer. We have moved quite a long way in the right direction, but I should like to see the Government quicken their pace now in placing less reliance on Government saving and much more on encouraging individual and family responsibility.
This was the theme struck by my hon. Friend the Member for Manchester, Moss Side (Mr. F. Taylor), in his excellent maiden speech in the Budget debate. He mentioned the phrase, "Trust the people". It reminded me of a speech that I made in the House in November, 1957. Cannot the Chancellor do more to encourage that Victorian—can I say Gladstonian?—virtue of thrift and see that reward is given for thrift? That is why I want to see an improved status for investment income and why I want wider share ownership encouraged and made possible. This would encourage the right investment in manufacturing industry.
I was disappointed that the Chancellor made no appreciable move in this direction in the Finance Bill. It is a pity that we could not have had a lowering of the Fuel Tax to help here. I


hoped that at least he could have given industry the same allowances in plant and machinery that they have on the Continent and in Japan as well, with a rate of investment of 31 per cent. of their gross national product. I say this because, unlike the Opposition, I do not wish to return to Socialism. I want to see a progressive form of capitalism given the chance to work. During the last few years we have been moving in this direction, but I want to see more of an impetus to make it able to grow now. If we have a tax on speculation, why not a bolder move in lowering Estate Duty? Why not a bolder move to encourage wider share ownership by lowering stamp duties?
The Finance Bill is not all that I wanted—no Finance Bill ever will be—but it has the great virtue of safeguarding the £ and, I hope, keeping stability in prices. For these reasons, I support it without hesitation and congratulate the Chancellor for having had the courage to act in the last two Budgets in keeping the balance as he has done.
I particularly thank him for the help that he has given to the elderly in small income relief and for the hope that he has aroused over the Schedule A tax. I wonder how much it would cost to relieve those over 65 of Schedule A tax in this Bill. I should like a reply from the Government spokesman on that, because, if it would not cost too much, I am sure that it would help a lot of elderly people just above the limit. It would be a concession well worth while and in the spirit in which the Chancellor made the small income relief.
Let me make it clear that what the pensioners as a whole and the country want more than anything else, and look to the Chancellor for, is a strong £, stability in prices, and to see that the strength of sterling is safeguarded. It is for that reason that I am asking him to focus more attention to helping the right investment in manufacturing industry, in plant and machinery, in the right position in the private section in the right industries, and to take care that we do not waste scarce capital resources in the nationalised industries as well.
Indeed, what we want is to get the right background of competition again

in our economy. Let us reform faster in getting away from the straitjacket which has held our economy in too inflexible a state for far too long, whether we go into the Common Market or not. I am sure that is the lead that the country wants and why, today, it appears to be so frustrated. Reform is coming too slowly, and in a speedily changing world we just cannot stand still.

6.20 p.m.

Mr. E. L. Mallalieu: The hon. Member for Harwich (Mr. Ridsdale) has made a most interesting and entertaining speech, at least from the point of view of some of us on this side of the House. I suppose that he felt he had to justify his title of "Liberal"—or is it "Liberal -National"?—with which he comes to this House.

Mr. Jeremy Thorpe: Liquorice all-sorts.

Mr. Mallalieu: It was entertaining to hear the hon. Member arguing from his side of the House about the virtues of free trade. Some of us remember the fell work done by the party opposite in 1931, when, more than any other single action, their action of the Ottawa Conference and the reversal of the free trade tendencies of this country precipitated the creation of Hitler and the bringing about of the Second World War.
I was intensely interested also to hear the hon. Member criticising his Government indirectly for their failure to encourage investment in machinery which would lead to greater production. All this was very good stuff and I began to wonder whether the hon. Member would get his baronetcy if he went on in that frame. He came round in the end, however, and he congratulated the Government on a wonderful Budget. So, I suppose, he will be all right.
Why is it that the investment rate in Germany has been, as the hon. Member said, so much greater than ours? The reason is that we have had a Conservative Government—a Government, that is to say, with, in the British technical sense, Conservative philosophy. They believed that Conservative freedom worked. So, of course, they tried to make it work and they went in for it hammer and tongs.
In the view of some of us, the Conservative Government could have made heaven of this country when the conditions in which the last war left it had to a large extent disappeared and the Conservatives came to power. They could have made heaven out of this country had they wished, but they preferred to sit back and do nothing; just to watch the development of affairs rather than direct their development. They took off the brakes and they made such a virtue of self-help that they brought it to the point where they encouraged it, even if that self-help would lead to things which were by no means good for the community.
Members of the party opposite did not mind—in the scramble which was bound to follow the bringing into effect of their policy of Conservative freedom—that ugly things would be done and that the community would suffer. All inconveniences of that sort—and they were of the category of inconveniences in their minds—were to be borne with patience, provided always that the £ was to be safe. That was the philosophy of Tory freedom.
We know that a great many of the electors who had not time to think deeply about these matters thought "Let us give it a trial." We have had this Tory freedom long enough to know that it just does not work and that whereas when the Conservative Party came into power 20s. was the value of the £, the same £ is now worth only 16s. or thereabouts.

Mr. Webster: I will give the hon. and learned Member 16s. for it.

Mr. Mallalieu: If the hon. Member gives me 16s. of the value of those we had when the party opposite came to power, I will accept it.
Inflation has been rife, those living on fixed incomes have been having a harder time; those who have loaned money to the Government are being plainly defrauded, because they are being paid back in debased currency. As each crisis comes upon us, the Government have just the same sort of reaction—the credit squeeze. They have no overall plan for the development of the country's economy. Obviously, they would not have a plan,

because it would be contrary to their concept of Tory freedom. They have allowed far too much development where there is too much already in existence.
Very few yards from this place, there is a glass, concrete and steel monstrosity, and there are many others in and around London, all allowed to be pushed up regardless of their effect upon the national economy in general. In places where too little was going on and where there was a tendency to contract and where unemployment was of a considerable order, even that which they had has been allowed to drift away.
The Government have stood by self-righteously and have just allowed this ugliest, least profitable and most lopsided of developments to go on. It is probably the most unprofitable and ugly development since the Industrial Revolution. The big difference is that whereas the Victorians and those before them who brought those things about in the Industrial Revolution had not the experience of these things from which they might learn, the modern Tory had the knowledge. He knew that if he left his friends to make a profit, regardless of what its effect would be upon the community, ugly things would be done.
But that the land should be defiled by ugliness and that the national character should be sullied by over-acquisitiveness and by an absence of compassion for those who are less well off in the order of society—that these things should happen was just too bad to some hon. Members opposite. What mattered was that they should remain in power. Everything that they have done in the last ten years has been following the example of the late Earl Baldwin, who did not mind what policy he carried into effect so long as he remained in power.
I suppose that hon. Members opposite counted upon the people whom they had allowed to make enormous moneys and to enrich themselves on expense accounts, property deals or whatever it might be, supplying them with enough funds to be able to bamboozle the electorate again and again. And so they have gone on with their credit squeezes after elections and their spending sprees just before elections.
Most hon. Members know what the effect on the economy of that sort of


policy has been. We have had an increase in output of only half that of many of the Common Market countries, and all the time costs and prices have been going up to a pitch which it is difficult to make any sizeable increase in exports. The curious thing is that this rise in prices and costs has been going on both in the periods of squeeze and the periods of sprees. That shows the complete irrelevance of the conventional Conservative remedy for our economic state.
The impartial report of the O.E.C.D., to which the Financial Secretary to the Treasury referred to in his speeches some time ago on the Budget, was the most damning indictment of the Government that could possibly have been produced. It is true that there were things in it—it having been concocted, I have no doubt, in close collaboration with the Government here—that were reasonably complimentary, but at least it moved the Observer to claim that it read like a tale of mismanagement in the Ottoman Empire, or in Portugal.
In my submission, it is just as serious as all this paralysing of the economy which has gone on under Conservative freedom, that there has been this totally new mental outlook in the country in the last ten years of Conservative Government, with this idea that one must get rich quick and look after No. 1. This is something comparatively new. I know that it is not the result of the individual wishes of hon. Members opposite that this sort of thing has come about. It is the result of their philosophy and of the policy that the Government have followed.
I believe that many hon. Members opposite would deplore all this as much as I. But they are beginning to realise that it is all the result of the Tory idea that it is not necessary to have regard to the society in which we live, when we consider what action we should take: what matters most is that we should make money. The making of money by individuals, so they said, was the way to help the country.
What has the Finance Bill to do with either the economic situation or the moral situation to which the Government have brought us? The Bill is just an irrelevant jelly on the political plate. It wobbles slightly towards fairness

when it takes the beginning of a tendency towards a capital gains tax; and there is a very conveniently timed promise about Schedule A. Then it lurches away from fairness when it comes to a tax on sweets. In any case, if the Schedule A relief for the owner-occupier is so right now, why was it wrong in 1959–60, when it was proposed from this side of the House and hon. Members opposite voted against it?
What does the Bill offer towards increasing exports? I agree with the hon. Member for Harwich that it offers absolutely nothing.

Mr. Ridsdale: The hon. and learned Member has misinterpreted me. If he reads my speech he will see that I said that the Budget provides a sound basis for the expansion of exports.

Mr. Mallalieu: I understand that the hon. Member would not like to agree with the criticism in precisely the words that I used, but all the same I think that in the early part of his own speech he said something which went in the direction which I am now following.
I do not see anything in the Bill which is likely to increase the national cake so that we can all have a greater share. I see nothing in it which will make things fairer as between sections of the community. And this is absolutely hopeless in these days of almost endemic crises, when it is necessary for the Government to call on all people to make sacrifices. It is surely impossible for any Government to succeed unless it is absolutely dear that they are being fair. There is nothing in the Bill to shift the burden from income towards capital. The Bill is like the layer of useless fat on an old man's middle. Whether its cause is over indulgence or old age, the result is equally unfortunate. The sooner it is removed, and the bearer of it, too, the better for the national health.

6.34 p.m.

Mr. David Webster: The hon. and learned Member for Brigg (Mr. E. L. Mallalieu) concluded with a comment about the fat on an old man's belly. I am glad that in following him in the debate I have the figure I have. The hon. and learned Member did not discuss the Bill in very great detail. He contented himself mainly with criticising a state of affairs


in which he said a pound which was worth £1 in 1951 was now worth 16s. The hon. and learned Member declined my generous offer to take him up and buy at that figure. He said that there was a rush of greedy people to make bigger incomes, but the average wage has gone up from £8 10s. to £15 10s. and the National Insurance single benefit has gone up from 26s. 6d. to 55s., which seems to show that there is fair justice to people who it is often said by hon. Members opposite are the last to receive benefits from a Tory Government.
I should prefer to follow in the debate the hon. Member for Glasgow, Craigton (Mr. Millan) who spoke at great length on a matter which causes us considerable anxiety, and that is the relationship between direct and indirect taxation. The hon. Member criticised, firstly, that the Government are trying to switch taxation from the direct to the indirect, but almost in the same breath he criticised the Government for presiding over a period in our affairs when our growth has been very much less rapid than it has been on the Continent.
The analogy is very clear. At a time when our growth has increased less, when our gross national product has increased less and when our consumption of the gross national product on ourselves is 67 per cent. as against 56 per cent. in Germany, I believe that it is highly appropriate to switch from direct to indirect taxation. We are trying to discourage expenditure and encourage income and I welcome any tendency to that effect. I welcome the Finance Bill as the second part of a three-stage operation for the complete reform of our tariff, fiscal and if necessary currency systems. I welcome it also as an immense contribution to the creating of a more competitive and more balanced economy.
I see that hon. Members opposite are not here in great numbers to register their protest. [An HON. MEMBER: "Nor hon. Members opposite."] I cannot see my hon. Friends. I am facing the other way. Hon. Members opposite are criticising the Government for what is called a standstill Budget. But this is at a time when President Kennedy is having trouble with the steelworkers and employers and Dr. Erhardt in Germany is having equal trouble with manufacturers,

and where the threat in both cases is inflation. Dr. Erhardt has told the Germans, who are frequently quoted by hon. Members opposite as a nation of men 10 ft. high in their great economic achievements, that they are now standing with their backs to the wall.
Hon Members opposite quote German achievements as being much greater than ours, but the Germans are now frightened of the renewed competitive position of this country brought about by the courageous and wise policy of my right hon. and learned Friend the Chancellor of the Exchequer. This policy is unpopular. It is losing by-elections and municipal elections, but it is not our function to be judged on a 15 per cent. tax on lollipops. The fact is that our economy is now acknowledged by the Germans as increasingly competitive and it worries them a great deal.
On the question of the switch from direct to indirect taxation, I welcome the changes in Purchase Tax effected by Clause 6. As my hon. Friend the Member for Kidderminster (Mr. Nabarro) has so frequently pointed out, Purchase Tax is riddled with anomalies. It is a tax which has been seen to be so riddled and complicated. It is right and proper that it should be simplified and clarified and I hope that in time we shall come closer to a unitary system. By causing the regulator to be used between successive Budgets my right hon. and learned Friend has been able to do away with the pre-Budget hiatus in industry. We know that in the consumer goods industry after Christmas and immediately before a Budget there is a hiatus. My right hon. and learned Friend has changed Purchase Tax at times other than the Budget and, Latin scholar as I know him to be, I hope that he will not mind my saying that he may well go down in history as Selwynius regulator.
We are also told to change our situation nearer to what it has been in Europe. There are those who do not wish us to go into Europe and those who do, but practically everybody who castigates the Government says that we should follow European practice. If this would mean stronger harmony and greater simplicity, then I think that we should welcome it.
I also welcome the simplification of the fiscal code, which will give greater incentive to production and will mean that business men will not have to waste so much time working out their taxation. The more endeavour there is behind productive work the less concentration will there be on non-productive effort.
My right hon. and learned Friend will also earn our gratitude for what he has done to boost the gilt-edged market. Before hon. Members opposite shrug that off, and say that it is simply long nosed gentlemen who are concerned, I should point out that the people involved are the holders of war loan and that many of us on this side of the House have raised their plight.

Mr. Jeremy Thorpe: I think that it should be pointed out that what appeared to be a highly anti-Semitic remark did not emanate from this side of the House but from the benches opposite.

Mr. Webster: The hon. Member for Devon, North (Mr. Thorpe) was not in the House at the time.

Mr. Thorpe: Yes I was. It was the right hon. Member for Flint, West (Mr. Birch) who said it.

Sir C. Osborne: My hon. Friend the Member for Weston-super-Mare (Mr. Webster) did not say it.

Mr. Callaghan: He said it came from this side of the House.

Mr. Thorpe: The hon. Gentleman should withdraw the statement that the remark came from this side of the House. It was made by the right hon. Member for Flint, West.

Mr. Webster: That is so. Having said that, I will now continue with my argument.

Mr. Thorpe: The hon. Member should withdraw.

Mr. Webster: I am now talking of the people who are investing in war loan. Many of us—and the hon. Member for Devon, North, to do him credit—have raised the matter. It is a fact that, since the Chancellor has reduced our below-the-line net payments to £507 million and our net borrowing to £64 million, compared with £69 million last year, and has stated that he will find

it less necessary to come to the gilt edged market for finance, the position of War Loan has gone up from 51 a year ago to 55¾ today.
This is an indication of the increased confidence in the pound not only by international financiers but by real people who have invested their savings in war loan and other irredeemable Government securities. If we can continue in this way, it will perhaps be possible one day again to go to the City with an irredeemable investment to offer to the people. Until that is done, we will have to continue to raise money by much more expensive methods.

Sir C. Osborne: Whilst we welcome the improvement in War Loan from 51 to 56, we should not fool ourselves. At one time it stood at well over 100. We have only just started to do justice to the fixed interest bearers.

Mr. Webster: I am grateful to my hon. Friend for pointing that out, but I was saying that what the Chancellor is doing at the present time in his courageous and wise policy is giving opportunities for reaching a state of affairs which is very much better for the general health and balance of the economy.

Mr. William Warbey: Will the hon. Gentleman explain how the Government policy of maintaining high interest rates has helped to improve the value of Government securities?

Mr. Webster: The hon. Member may or may not be aware that the Government have reduced the Bank Rate on five different occasions in the last 6 months. It was put high last summer for external purposes and it has proved particularly effective. That again shows that my right hon. and learned Friend's policy generally has been highly effective.
Without extending this discussion too much, one may ask, in passing, "Where is 'Neddy'?" We seemed to hear a lot about him at the beginning of the year. We welcome the fact that the unions have joined. I hope that we shall hear more from "Neddy", that it will be an effective advisory council, and that it will help to bring all parts of industry, including, perhaps, the consumer, into advising and taking an intelligent interest in the affairs of the


country. Indeed, very much more than that.
I have also previously raised another matter. I have said that I hoped this Finance Bill will be part of a tariff review as well. I agree with my hon. Friend the Member for Harwich (Mr. Ridsdale) and the hon. and learned Member for Brigg that when tariffs were put on thirty years ago we were trying to protect industries with heavy unemployment. Today the opposite is the case.
It has been said that exporting is fun. I beg to doubt the veracity of that remark. I shall quote the case of a firm—I shall not give its name—which exports 25 per cent. of its total capacity to approximately 50 different countries. The managing director himself goes abroad by air at great personal effort, but there can be no better way of leading an export drive than for the head of the firm to go abroad himself.
This gentleman cannot increase his factory's capacity at the present time, and is having to sell at lower profit margins abroad while, at the same time, other companies, protected by tariffs and less efficient than his own, and which never make the slightest attempt to enter the export market, are doing very good business. If this tariff system could be disposed of it would bring a competitive edge to industry, both among management and employees.
In conclusion—to use that cheerful word that always encourages everyone in the House—I sometimes wonder whether we are not too solemn about our economic affairs. We talk about the increase of manufacturing products of heavy industries. Although I am an English Member, I am a Scotsman and I am aware that one of our best export products is a liquid asset from Scotland. There are many things which people might consider frivolous but which we do not export sufficiently as a finished article.
There has been talk today about the clothing industry. That industry, particularly in wool textiles, is one which could give a lead in selling material to many parts of the world. In recent years, whether we like it or not, we in this country have had a retailing revolution which has changed our methods of

distribution beyond all measure. In this matter, we lead all other countries in this part of the world. I would like to see these great companies, now to be seen in every high street in this country, encouraged to go to Europe to export the fine goods we produce, often mass-produced but at the same time craft made. These things show that we are not simply in the nineteenth century trying to sell old machinery to build up competition against ourselves.
We have nothing to be ashamed of in the finished article, or in our craftmanship. But at the same time we on this side of the House have nothing to be ashamed of in a Budget which is bringing a new air of realism into the affairs of the country, and which, as I (have said, is, I hope, the second stage of a complete reform of our tariff. fiscal and currency system. For that reason, I welcome the Bill and make practically no reservations about it.

6.50 p.m.

Mr. William Warbey: A few years ago, when I visited a Communist country, I was assisted in an interview with the Minister of Economic Planning by a charming and aesthetically inclined interpreter. There were some rather complex questions about the way they planned their economy in that country, and some even more complex answers, and the interpreter was not terribly enthusiastic in doing his job. I tackled him with this afterwards and he replied rather dolefully, "There is no music in the plan". I thought about this when listening to the Economic Secretary this afternoon—[HON. MEMBER: "The Chief Secretary."]—I meant to say the Chief Secretary; I beg the Economic Secretary's pardon. I felt rather inclined to reverse the remark and suggest that in his case there was not plan in the music. But at least he gave us a lucid exposition of the Finance Bill, which no doubt the Attorney-General will put right later. However, he did not attempt, as is usually done in these debates, to relate the Finance Bill to the purposes of the Government in seeking to guide the economy.
I had thought that we had reached a point at which we all accepted the necessity for some kind of planning and the achieving through fiscal as well as other


measures of certain definite objectives for the economy. But, apparently, that aim has now been abandoned since the Chancellor of the Exchequer is resorting to consulting his pet astrologer in order to forecast the country's future.
We should briefly consider what our main economic objectives are and how far the Finance Bill is related to them. I suppose that there are three and that we all agree about two—that we must seek to achieve constant and fairly high economic growth at decreasing cost, that we should seek to pay our way in our external economic relations, and thirdly—I am not so sure that we all agree on this to judge from the Government's record—that there should be a fair distribution of the nation's resources.
Let us take them one by one and deal first with economic growth. After ten years of Tory rule, we have a situation in which the rate of economic growth is less than half what it should be, in which economic development is stagnant, and in which we have an economy which is recognised to be flabby, inefficient and incompetent and in which, as a result of Government policy, many people, mainly among the classes of those who are most responsible for the direction of the economy, are increasingly inattentive to real productive development and are paying far more attention to the easy pickings which can be got by lifting up the telephone receiver and speaking to one's broker.
What is the Chancellor's remedy for this slow rate of growth of our economy? So far as one can judge, the only definite measure which we have before us is to reduce the real wages of the workers and salary earners in order to make ourselves more competitive and so increase our exports. That is his sole contribution to a solution of the country's economic problems. In fact he has succeeded, for the first time since 1931, in reducing the real wages of the workers, because since last July, since the "Little Budget", prices have actually risen faster than wages and salaries. This, of course, is deliberate Government policy.

Mr. John Hall: Was it not a constant factor during the period of 1945–51 that prices were rising faster than wages?

Mr. Warbey: No. I think that the hon. Member for Wycombe (Mr. John Hall) will find that there was no period when there was a drop in real wages.

Mr. John Hall: And the value of pensions?

Mr. Warbey: I am speaking of the wages and salaries of the masses of the workers which have been cut as a result of deliberate Government policy, a policy which the Chancellor justified on the ground that somehow or other it would stimulate the country into increasing production and exports.
It has done nothing of the sort. The result of the policy has been an increasing misuse and under-employment of our resources of manpower, materials and equipment and an actual rise in unit costs of production compared with last year. Apart from fortuitous increases in costs which are now beginning to occur among some of our competitor countries, the Chancellor has made our position worse and has done so at the expense of the masses of the workers. He is continuing this policy both by trying to impose wage restraint, limiting increases to 2 to 2½ per cent. during the coming year, and by imposing increases in indirect taxation—15 per cent. on sweets and ice-cream, consolidation of the 10 per cent. introduced through the economic regulator last August, the rise from 5½ to 10 per cent. in Purchase Tax on necessities.
On the other hand, this year—because this is the year in which it becomes effective—he is distributing increased purchasing power to the 300,000 Surtax payers. This is the year in which they are able to spend the extra money out of the incomes which they are now drawing, instead of saving it to pay the tax which would be due next year. That is the Chancellor's achievement in making a contribution to economic growth.
Let us now consider the second aspect, the necessity to pay our way in our external economic relations. Here we are still in a deplorable position, despite the Chancellor's sunshine speech. We have just had two years in which the accumulated deficit on current account has been £360 million. There is very little prospect that much will be done in the present year to reduce that accumulated deficit. We have been


saved from bankruptcy first by "hot" money coming into the country and then by the loans put together by the international bankers in return for an undertaking that we would enter the Common Market.
Now, and thirdly—and this is the new and serious feature of the development of our external economic relations—we are saving ourselves from the consequences of defaulting in our external payments by selling off parts of British industry to foreign investors. The Chancellor has actually boasted that we are now getting more long-term investment coming into the country from outside. Last year, for the first time in modern British industry, we imported more capital than we exported. I do not regard the situation with any equanimity. It means, first, that we are really paying for excessive imports by putting parts of British industry in pawn to foreigners and, secondly, that we are building up a position in which our future balance of payments will be worsened by the payment of interest and dividends to these investors in future years.
As we all know, the position on the invisible side of our foreign accounts has seriously deteriorated in the last two years. Before long we may reach a situation in which we are no longer able to rely on a favourable balance in invisible items to make up for the deficit in the visible ones. What are the Government doing to correct this long-term trend and to plan our external economic relations? We talk today about planning our internal economic affairs and this has even been accepted—in words, anyway—by hon. Gentlemen opposite. But what is the sense of talking about planning our internal economy if we do nothing about planning our external economic relations—the part which is the most serious and dangerous factor in our economy?
We all realise that the main problems of economic development arise out of our external economic relations, yet we do nothing whatever to plan these relationships. The Government are quite content to leave them to laissez faire and exhortation for more exports while no steps are taken to plan our trade and foreign investments in such

a way as to be beneficial both for our own economy and the economies of those countries overseas we should be helping.
I should like to see, both through the Budget and in other ways, definite steps taken to assist our export trade in the right direction and to control our imports so that we do not find ourselves buying from the United States and Western Europe goods which we cannot afford to pay for, which we do not need and which we could make perfectly well ourselves.
I turn to the third problem—the fair distribution of the proceeds of economic development. Here, of course, the Government's record is appalling. I have already said that they have actually decreased the real incomes of the masses of the people and that it is their intention to continue to do so. I am glad to see the Economic Secretary in his place because he has already attempted to explain this away in previous interventions. I refer, of course, to that mysterious reference in the Chancellor's speech, and in the Economic Survey, to an anticipated rise of 4 per cent. in real personal spending in the coming year
Who is going to do this spending? If the masses of the workers and salary earners are to be tied down to increases of 2 to 2½ per cent., who is going to spend the balance? When the Chancellor speaks of a 4 per cent. increase in real personal spending, what is the increase to be in monetary terms, because I presume that the Chancellor—perhaps the Economic Secretary or the Financial Secretary could explain this—is budgeting on an assumption that there is going to be a continued increase in prices in the coming year?
Prices and the cost-of-living index have been rising and the Chancellor is adding to the cost of living by his Budget. It seems likely, therefore, that this rise will continue. How much is the rise likely to be? Will it be 2 per cent.? Would the Economic Secretary hazard a guess? I do not think he would deny that there is every expectation that the cost of living will rise by 2 to 3 per cent. in the coming year.
That means that if the increase in real personal spending is to be 4 per cent., the increase in monetary terms must be


6 to 7 per cent.—yet 24 million wage and salary earners of this country are being tied down to an increase in their incomes of 2½ per cent. I have made a calculation with which I will trouble the House and no doubt the Economic Secretary will correct me if my figures are wrong. If there is a 6 per cent. increase in monetary spending in the coming year that will represent something like £1,038 million. A 2½ per cent. increase in the wage and salary bill would amount to £375 million, which leaves a balance of £660 million to be accounted for in personal spending.
The Economic Secretary tried to explain this away in an intervention during the Budget debate by saying, in effect, "But during the coming year we are expected to have a lot more school leavers coming into employment. We are also expecting that some of the unemployed will find jobs so that this will add to the incomes of the people." By how much does the Economic Secretary expect employment to increase during the current year, including the school leavers? Will it be 100,000 or 200,000, for it can hardly be more than the latter? By how much does he expect the incomes of those 200,000 will be increased? Let us consider the rise in pay compared with unemployment benefits and the school leavers who will be getting their first jobs and earning £5, £6 or £7 a week. Let us say that they will get an average increase of £300 a year each. For 200,000 people this amounts to £60 million a year.
That is £60 million accounted for out of the £660 million which must be accounted for. If the Economic Secretary thinks my figures are wildly wrong I am sure that he will be prepared to correct them. They show that a few people are going to spend the extra £600 million during the coming year. Some of them will be self-employed. Let us say that they will spend an extra £100 million. That still leaves £500 million, which will be the extra spending power of about 1 million people in this country. That is about £500 extra each. In other words, 2 or 3 per cent. of the population whose incomes are derived from capital gains and from rent, interest and dividends will do the bulk of the extra personal spending in the coming year. They are going to do it

to the tune of £500 million. What are they going to do it out of? There is no difficulty in answering that, for they are doing handsomely indeed.
During the last year the total amount received in rent, interest and dividends was £2,500 million, an increase of 43 per cent. in five years, compared with an increase in wages and salaries of only 25 per cent. in the same period. So the people who rely on unearned incomes have been doing extremely well during the past few years under a Tory Government.
That is not all. Vast capital gains have been made during the last two or three years, encouraged by the general policy of Her Majesty's Government. On the Stock Exchange alone ordinary shares rose during the last three years by £11,000 million. In addition, there have been the increases in values and the enormous and scandalous increases in the price of land and other fixed property, which must certainly have added during those three years another £4,000 million or £5,000 million to the wealth of the people who own those things.
In three years about £15,000 million, that is, £5,000 million a year, has been added to the income of those people. That £5,000 million a year plus the £2,500 million makes a total of £7,500 million, which is equivalent to 80 per cent. of the total wages bill of 17 million wage earners. Eighty per cent. of what 17 million people receive in wages went last year into the pockets of about 1 million people who have done not a hand's turn of work in return for that money. They may have done a hand's turn of work in some other way and got a salary for it, but for that £7,500 million of wealth, spendable money which they can expend on goods and services—including motor cars which, now, thanks to the generous Chancellor, they can buy more cheaply—they have done nothing. About one-twentieth or fewer of the income-drawers of the country are able to enjoy a vast increase in personal spending power out of tax-free money while the wage-earners are being pinned down to an actual reduction in their standard of living.
I was rather astonished when I read of my hon. Friend the Member for Southwark (Mr. Gunter) saying the other


day that talk of class war was "tripe". The extraordinary thing is that what the Chancellor has done—actually it is a great achievement—has been to crown the work of succeeding Tory Chancellors of the last ten years in restoring class war in this country to a form in which we have not known it for more than twenty-five years. He has achieved a modern miracle. He has restored the classic conception of Marxism which we all thought was out-dated, a situation in which wealth is concentrated more and more in the hands of a tiny fraction of the population and in which the rich get richer and the poor get poorer.

The Financial Secretary to the Treasury (Sir Edward Boyle): I have listened with interest to the hon. Member, but when he finishes his speech by accusing others of Marxism, he reminds me of Huey Long's remarks that it is the easiest thing in the world to create a Fascist party. All one has to do is to call it an anti-Fascist party.

Mr. Warbey: I am sure that the Chancellor would not call it Marxism. He would probably call it Tory freedom, but it works the same way, that is, the way it has worked in practice. It is a remarkable thing because it has no relationship whatever to the fair distribution of wealth. Neither has this capital gains tax on speculative transactions. I should like a Finance Bill in which we increased taxation on unearned income while relieving taxation on earned income and, secondly, in which we had taxation of wealth. I should like to see a nice datum line taken for that, say 1958 or even 1955. In Ceylon the year 1957 was taken. I do not see why we should not take the year 1958 and mop up a lot of the vast capital gains which have been made in the last three or four years under Tory rule.
On top of that, I would adopt the suggestion made by Samuel Brittain in the Observer and have an annual tax on wealth. The combination of those two things would raise something of the order of £1,000 million a year. I think we should shift the emphasis from taxes on income to taxes on wealth. We should make a beginning by a real redistribution of wealth and by building up a fund out of which we could pay for

the expansion of the social services and of the productive parts of British industry with money on which we do not pay an excessive rate to the moneylenders.

7.16 p.m.

Sir Cyril Osborne: The hon. Member for Ashfield (Mr. Warbey) has made three points to which I should like to reply. First, he said that the Chancellor had reduced the real wages of the workers. That is not true. In 1951, when we came to power, the average industrial wage of a man over 21 was £8 6s. a week. Last year, it was £15 5s. a week. Therefore, allowing for the increase in prices, the average wage of the industrial worker has increased by about 35 per cent. over the last ten years.

Mr. Warbey: I said since last July.

Sir C. Osborne: I am taking the record as it is. Under Conservative government during the last ten years the industrial worker has had his position enormously improved.
Secondly, the hon. Member said that there was no overall economic plan. The key to our economic situation is in the export trade. No party, of any colour, can plan exports. The second key is the labour force. In a free society one cannot plan the labour force. Only a tyrant, either a Communist or a Fascist, could do that, and I am not prepared to accept that.
Thirdly, the hon. Member said that last year we imported more capital than we exported. In that, I agree with him. What is the lesson to be learned? It is that the nation has been and is living beyond its means. We are eating, drinking, smoking, gambling and spending on sport more than we are earning and more than we can afford. If the hon. Member had stuck to that one point he would have done much better than presenting a number of half-truths. For the last four, five or six years the country has been living beyond its means. No one cares to say so publicly and brutally lest he loses votes; and that applies to hon. Members on both sides of the House. The curse of modern democracy is that we are frightened to speak the truth lest enemies on the other side use the truth to get fools to vote against us. I sometimes wonder


whether a modern democracy which controls an economic machine it does not understand can survive.
There is a dangerous tendency in our country today to assume that we somehow have the right to a higher standard of living each year whether we work or not and whether we earn it or not, that somehow we have a divine right every year to an increase in wages and salaries whether we earn them or not, and also a divine right to a shorter working week.
I believe that the greatest trouble with our economy today is that an increasing minority of people have a wrong attitude to work. This needs to be said over and over again. There is no wealth anywhere without work. Work is the source of all wealth. We cannot legislate ourselves into wealth. We have to work for it.

Mr. S. O. Davies: Who gets it?

Sir C. Osborne: I want those who earn it to get it. No one should get it unless it is earned. I am sorry to say that, but I believe it to be true. There is in this country a growing belief in more than one section of the community that work is something to be evaded, to be dodged, and that "clever boys" can live without working.
What I should like to see in a Finance Bill are greater rewards for those who work and greater punishments for those who do not. I think that society has to do this. I want to see brought into our economy a bigger carrot and a bigger stick, so that those who work are rewarded for it and those who do not are punished.
I support most warmly the Chancellor's wage pause policy because I believe that he has helped to provide stable prices, which are the greatest of our economic needs. These stable prices have done three things. First, they have given the British exporter a better chance to sell in world markets. Secondly, they are safeguarding the real value of pensions. Thirdly, and this is seldom mentioned in this House, they are helping to safeguard the real value of the £40,000 million fixed interest bearing savings which the people have got together in the Post Office Savings

Bank, in the Trustee Savings Banks, in the building societies, in War Loan, in Government stocks, and in the National Savings movement.
During the last seventeen years during which I have been in the House too little thought has been given to the rights of the men and women who have sacrificed to save through these fine old agencies. I therefore consider that so far as the Chancellor's wage pause policy has led to stable prices he should be supported and not blamed.
I hope that one of my hon. Friends on the Treasury Bench will listen to my regrets about the wage pause. They are that it was not imposed earlier, that it has not been kept on longer, and, most of all, that it was not enforced more rigidly. I regret, also—and I have said this before—that when it was imposed the Chancellor failed to impose an equal capital gains tax and statutory dividend limitation, and failed to control land speculation. Had he done these things when he introduced the wage pause, the workers would have accepted the pause more willingly.
May I remind hon. Gentlemen who rather derided the wage pause, and blamed my right hon. and learned Friend for it, that the wage pause was, in fact, an invention of the Socialist Government. The only difference was that in 1947, 1948, and 1949 the Socialist Government called it a wage freeze. I should have thought that a wage freeze was even worse than a wage pause. Perhaps I might remind the House of what was said by a previous Chancellor, for whom I had a great regard when he was alive, and whom I defended many times when I was in opposition.
It is worth reminding ourselves what a courageous man like Sir Stafford Cripps had to say about this. Speaking in the House on 27th September, 1949, he said:
Any worker by hand or brain who goes slow, or is an absentee, or demands more money for no more output, is, in fact, doing his best to put up his own household bills, and to put somebody—quite possibly himself—out of a job."—[OFFICIAL REPORT, 27tb September, 1949; Vol. 468, c. 31–32.]
That is the kind of thought in which I wish my right hon. and learned Friend the present Chancellor had indulged when he instituted the wage pause.
Then, discussing a problem not unlike the one through which we are passing today, on 26th October, 1949, Sir Stafford Cripps said:
'We can express our present situation, robbed of all its technical surroundings and explanations, in quite simple terms. Unless we can all quickly produce more and get our costs down, we shall suffer a tragic fall in our standard of living accompanied by all the demoralising insecurity of widespread unemployment."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1352–53.]
If my hon. Friends on the Treasury Bench would listen to me instead of gossiping, it would help considerably. This is the key to the problem. Any fool can produce goods, but it is no good producing goods which cannot be sold, and it is useless producing goods for the export market if they are too dear.

Mr. S. O. Davies: Why did the hon. Gentleman oppose Sir Stafford Cripps?

Sir C. Osborne: I did not.
I quote Sir Stafford Cripps again to meet the point, made with all sincerity by hon. Gentlemen opposite, that greater welfare benefits should be given to the workers. On 18th April, 1950, he said:
We have in the last four years taken on by way of social services and benefits all that we can possibly afford until such time as there is a large increase in our national production. …"—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 61.]
Since then the amount being spent on social services has been doubled, but the message is still true. We can pay out in social services only from the wealth Chat we create by our work.
When Sir Stafford Cripps addressed the T.U.C. Conference at Margate on 7th September, 1948, he said:
There is only one way by which, with a given volume of employment, we can increase our real standard of living, and that is by each of us producing more. There is no other answer.
That is as true today as it was then.
To quote Sir Stafford Cripps again, on 10th March, 1947, he said:
… we cannot afford increases in wage levels or shorter hours unless they increase productivity per man-year."—[OFFICIAL REPORT, 10th March, 1947; Vol. 434, c. 994.]
My final quotation of Sir Stafford Cripps is what he said at Workington on 9th January, 1959:
You must be patient, and you must not ask for, or expect, any further advances in

social standards or wage levels until we have been able to increase productivity. …
He said that when wages were about one-third of what they are today.
I ask my hon. Friends on the Treasury Bench to take this line of argument to the country, and to do the same to some of the wealthier sections of the community. I am sure that if they explain to the people what they have to do, they will get better results.

Mr. Houghton: Would the hon. Member agree that Sir Stafford Cripps had a moral authority to say what he did which the present Chancellor of the Exchequer has not? Does the hon. Gentleman realise that the accompanying conditions which enabled Sir Stafford to speak as he did to the trade unions were irksome to the hon. Gentleman's hon. Friends at the time, who were bitterly opposed to the removal of curbs and checks upon spending and wealth-getting?

Sir C. Osborne: First, I do not agree that Sir Stafford Cripps had any exclusive right to speak morally on economic issues. I think that the character of my right hon. and learned Friend the present Chancellor does not require any defence. [An HON. MEMBER: "Suez."] For goodness' sake try to be serious on a serious matter. My right hon. and learned Friend's character does not require any defence. Although Sir Stafford Cripps was a fine, moral person, I do not say that he was the only man who could make this appeal. I defend my right hon. and learned Friend for making the same appeal.
The hon. Gentleman asked me whether we did not oppose controls. Of course we did. He will remember that his right hon. Friend the Member for Huyton (Mr. H. Wilson), when he was President of the Board of Trade after Sir Stafford Cripps died, said in this House—I remember it well—that it gave him great joy to have a bonfire of the controls which had been imposed by Sir Stafford Cripps.

Mr. Jay: The hon. Gentleman's history is wrong. That was said long before Sir Stafford Cripps died. That dismantling of controls was done with Sir Stafford Cripps' authority.

Sir C. Osborne: The right hon. Gentleman and the hon. Gentleman must sort it out amongst themselves.
I leave the history and come to the present situation. I regret that an item of £51 million extra was needed for the National Debt interest charge. That was due to the high Bank Rate of 6 and 7 per cent., which I said at the time that I regretted. I have nagged for its reduction ever since. Is it not possible to control the volume of money without increasing its price? Surely it is. It is possible that the volume of money can be controlled by the banks and the Treasury without putting up its cost. I am grateful for the reduction in the Bank Rate from 7 to 4½ per cent., but the average Bank Rate in the free world is nearly 3½ per cent. Why does not my right hon. and learned Friend get it down to 3½ per cent.? The hot money that came to us was no good to us. It deceived nobody. All it did was to put an extra charge on the taxpayers. I beg my right hon. and learned Friend to help industry and, above all, the people who are buying their own houses, and to get the Bank Rate down to 3½ per cent.
Lastly, I should like to make these short points. The greatest danger in considering a Finance Bill and our economic situation is to look at them purely and exclusively from an internal point of view. We nag about this section not having a fair share and the others having too much, when the real problem is that of exports and our position in the rest of the world.
I remind the House of three considerations from the international setting of our economic situation. First, I remind hon. Members opposite that we are living not only in a world where the wind of change is blowing so violently. We are living in a world which is growing at an alarmingly rapid rate and where the rest of the world is saying, "Why should a white man have so much more than the coloured people?" Secondly, the Afro-Asian nations, upon whose natural resources our own well-being depends, are asking why they should allow white people to go to their countries to exploit or develop their raw materials—tin, copper, lead, oil, and the rest—to give us a standard of living ten times higher than that which they enjoy. This question concerns not only this country. It

is a question which the whole white world has to answer.
Lastly, in its international setting what our people at home do not realise is that amongst the white peoples we stand to lose more than any other if there is a redistribution of the total wealth and income of the world. If the total wages of the world's workers were pooled, it would work out at about £2 10s. per week. If Socialism, of which the hon. Member for Ashfield talked so glibly, were to be really applied on an international scale, the wages of this country's workers would be down to 50s. a week. We are the people who stand to lose most.
This is what I want to be remembered. This is where I think that the Treasury has failed us in not putting the facts before the people. The people have no idea how delicate and desperate our economic position is at present. We produce half the food that we eat. We have no raw materials. We have to import both food and raw materials. To pay for them we must export roughly 30 per cent. of everything we produce. Nobody can compel a foreigner to buy British goods. It is on price and quality alone that we sell them.
The House will forgive me for saying that last Friday I stood in the centre of Amman, opposite the great mosque. I watched the motor cars. I counted the number of English cars amongst the foreigners—1 in 12, 1 in 17 and 1 in 25. The Germans appeared to have a monopoly. This was in a country which is tremendously favourable towards us, a country which depends upon us for finance. I said to the Jordanians afterwards, "Why are there so few British cars?" They said, "Because German cars are cheaper and better".
On Easter Monday, I stood outside St. George's Hotel, in Beirut, and I again counted the number of British cars. We had a little better record there—1 in 6, 1 in 10, 1 in 15. Again I asked, "Why do we sell so few English cars here?" The answer was, "Your cars are too dear and they are not good enough".
As a trader, I went round the shops in each of the cities. In Damascus, the situation seemed worse. We should tell our people that if they have higher wages and shorter hours and produce less goods and poorer quality goods the


whole of us one day will starve and Sir Stafford Cripps's dire warning will come true.
In case my right hon. and hon. Friends on the Treasury Bench are sick and tired of me quoting Sir Stafford Cripps, may I quote one of the sayings of the greatest Member of the House. In "The Gathering Storm" my right hon. Friend the Member for Woodford (Sir W. Churchill) said this, on page 7. This is of the 1930s, when again we had a Government that seemed frightened to tell the people the bitter, unpleasant truth for fear of losing votes.
My right hon. Friend said:
The multitudes remained plunged in ignorance of the simplest economic facts, and their leaders, seeking their votes, did not dare to undeceive them.
My right hon. Friend also said:
No one in great authority had the wit, ascendancy, or detachment from public folly, to declare these fundamental, brutal facts to the electorates; nor would anyone have been believed if he had.

Sir E. Boyle: While my hon. Friend is pursuing these researches, will he look at the wise saying of a former Prime Minister, Lord Balfour, whose statue is being unveiled this week or next? One of his sayings is, "This is a singularly ill-contrived world, but not quite so ill-contrived as that".

Sir C. Osborne: I do not think that Lord Balfour stands in the same street as my right hon. Friend the Member for Woodford. My hon. Friend the Financial Secretary can choose his man. I would rather have my right hon. Friend the Member for Woodford and, if I must, I would rather have the late Sir Stafford Cripps. I have been abroad quite a lot and I have seen and been very anxious about our exports. The people are not aware that their very livelihood and their standard of living depend upon exports, nor have they any idea how difficult it is to sell these exports.
I beg the Government to do two things: first, to recognise that the restraint which they have imposed upon the poor should be imposed upon the rich; and, secondly, to tell the people the truth, whether we win by-elections or not. I would rather see my party be destroyed at the next General Election for telling the truth than see it get back to power by telling soft half-truths.

7.41 p.m.

Mr. Anthony Crosland: I am delighted to hear the final statement of the hon. Member for Louth (Sir C. Osborne), and, as his constituency is next to mine, I am sure that I shall see a general swing of opinion in those constituencies to the Labour Party. The hon. Gentleman and I have a common interest in a football team which plays in his constituency but bears the name of mine and has just been promoted to the Second Division. One agrees with a lot of what the hon. Gentleman has said; he is such a curious mixture of the extreme reactionary and the extreme Radical that one can never tell on which side of the fence he is going to come down. I agree with his judgment of Lord Balfour either against the right hon. Member for Woodford (Sir W. Churchill) or the late Sir Stafford Cripps. And I agree about the Afro-Asian nations, though I wonder how the hon. Gentleman reconciles these views with his advocacy of the Commonwealth Immigrants Act.
One agrees with him also because, unlike other hon. Members who have spoken from that side of the House, who having made their speeches without exception have now left the Chamber, he talked about nothing but production and export markets. [An HON. MEMBER: "What about the hon. Gentleman?"] I have not made my speech yet. Everyone, without exception, has spoken almost entirely about the gilt-edged market or the money market, and most hon. Members opposite seem to judge the state of the economy by the stale of the money market or the gilt-edged market, while the hon. Member for Louth drew attention to the real things that matter, such as production, wealth, exports and the rest, and that, at any rate, is a change for the better.
All the hon. Gentleman's speeches are marked by two dominant passions, both of which I think are illusions. He said that everything depends on wage restraint and at another time he said that everything depends on hard work. I think that in respect of the first he, like the Government, has got this very badly out of perspective. He talked of the late Sir Stafford Cripps in a way that made me wonder what sort of rôle he himself played when Sir Stafford


Cripps was making these speeches. I came into the House only in 1950, but I had experience of Sir Stafford Cripps as Chancellor for one year, and one of the most disagreeable experiences during that time was the treatment given to Sir Stafford Cripps by Conservative Members who were then sitting on this side of the House. I remember, in particular, speeches made by the right hon. Member for Flint, West (Mr. Birch), even more personal and more patronising than the one he made this afternoon; they remain among the most unpleasant recollections of the time I have been in the House.
When Sir Stafford Cripps was making these speeches, which he undoubtedly had the moral authority to make, he was hounded mercilessly by Conservatives then sitting on this side of the House. He was not only hounded by Conservatives. Hon. Members may remember that when Sir Stafford Cripps went to a famous dinner of the Motor Manufacturers' Association and asked for the Association's support for a higher proportion of its products for export he was booed by the motor manufacturers. Therefore, to hear all this praise of Sir Stafford Cripps twelve years later coming from a Conservative Member strikes me as being a little nauseating.
The hon. Gentleman in one side of his character is an old-fashioned Marxist, which explains one or two of the "Hear, hears" which he got from this side of the House at one point in his speech. He really does believe, as nobody else has believed since Marx, in a pure and unadulterated theory of labour values. This is something which leads him to his constant lecturing of the British people, as compared with the people of other countries, for not working long enough hours or not working intensively enough. This will not stand up to any examination of the facts. There is a popular view about this country abroad that British hours per week are shorter as compared with the international standard. They are nothing of the sort. British workers work longer hours than German workers, and, of course, far longer than American workers. Nor do they work less intensively. Every one of the Anglo-American productivity teams which

went to the United States after the war—I think about 50 of them, covering almost every industry—came to the conclusion after going round American factories that there was no appreciable difference in the intensity of work between British and American factories. It seems to me that this is a case where the working hours are being used in order to distract the attention of the people from what is really wrong with the British economy.

Sir C. Osborne: When I said "workers" I meant workers of all kinds—technical workers as well as manual workers. If it is not the work that makes the difference, why is it that in overseas markets foreign products appear to be cheaper and better?

Mr. Crosland: Perhaps the hon. Gentleman will allow me to postpone the answer to that question, since it is the main part of the argument which I want to address to the House. I intend to deal with the question of what is wrong and what is needed to put it right, but at the moment I wish to make a few more remarks about the speech of the right hon. Member for Flint, West.
The right hon. Gentleman said that his heart sank whenever one of my hon. Friends rose. My heart sinks every time the right hon. Gentleman rises, and partly for the same reason which he gave—because he comes here and makes the same speeches every year. His typical phrase, which came out again this year, and which I think he has used, like most Tory Chancellors, is "Caution must be our watchword". This is simply not going to be the policy on which the British economy will get going again in competition with other countries.
I take up one or two more of the remarks he made. He made an inaccurate remark about the reserves which, if it were believed, would suggest an even narrower range of manœuvre than the Chancellor has at present, when he said that our quick liabilities are three times our quick assets. This is simply not true on any proper definition. The relationship of quick assets to liabilities is very much more favourable than three-to-one, and it is highly misleading to give the impression that it is three-to-one. In any case, the answer to our reserve problem is to get some more


imaginative reforms of the International Monetary Fund, and until this is done our reserves position will continue as it has been in the post-war years. The Government themselves are open to criticism on this point, because when a variety of schemes for radical reform of the International Monetary Fund were put forward, they always supported the most cautious instead of the most far-reaching.
Since I know the person concerned, I must also correct an inaccurate remark which the right hon. Gentleman made about Professor Lipsey, who wrote a letter to The Times, in which he "advocated permanent inflation," according to the right hon. Gentleman. He did nothing of the sort, and nobody but a fool would do that. In his letter to The Times he drew attention to the fact that mild inflation is not necessarily and always worse than the economic stagnation we have had in the last 18 months. This is very different from advocating permanent inflation. The lack of production is indeed one of the worst things the economy can suffer from.
That is the reason why in this country we never have any room for manœuvre but are always in difficulties with particular groups of wages or salary earners and never have enough money to spend on things that we want, such as roads, hospitals and education, while the Government are making the most trivial economies. The Government have been economising by some few thousands of £s at a cost of allowing the Doric Arch and the Coal Exchange to disappear.
This is not simply due to the fact that some members of the Government have not the slightest interest in these things. It is a sort of constriction on the whole economy and on the possibility of public spending and the granting of salary increases which arises from the fact of the slow growth of production. What Professor Lipsey said, and I profoundly agree with him, is that it is not clear that some degree of very slight inflation is worse for the community as a whole than is this loss of production and failure to grow. That is all he said.
Another of the right hon. Gentleman's remarks that I thought misleading was when he accused hon. Members on this side of saying that the economy ought

to be run flat-out. I must confess that I have never heard that phrase used from this side. The right hon. Gentleman went on to say that the economy surely must be running flat-out now because there is only 2 per cent. of unemployment. If he believes that, of course, he believes that all the investment that has taken place in the last year and a half, during which period production has not risen, has been utterly wasted, and that is absurd. Obviously, in any year, the investment that takes place makes possible an increase in production. We have not had that increase in production so, whatever the unemployment figures show—and the right hon. Gentleman admitted that there was a good deal of concealed unemployment—there is at the very least a reserve production increase in the system due to new investment in the last year and a half.
I turn now to the main point of the Budget and what the Government's policy is. The Chancellor has suddenly started to be very optimistic, and the Chief Secretary said that the Chancellor was encouraged by the strength of sterling. One would, of course, love to be encouraged by the strength of sterling if the improvement in the position and in our prospects were due to the kind of factors to which it ought to be due if our economy was being properly managed.
For example, if the improvement were based on rapidly rising production, we should be delighted; but it is not. Production has hardly risen for a year and a half. Of if the improvement were based on an obvious increase in British export efficiency relative to other countries, we should be delighted; but there is no evidence of rapidly increasing productivity in this country. Indeed, it would be impossible, at a time when production as a whole is stagnant, to have a great leap forward in productivity. So the improvement is not based on any evidence of rapidly rising efficiency.
Again, we would be delighted were it based on a rapid rise of investment as a proportion of the national income. It is true that investment has gone up somewhat, but it has not gone up sensationally, and it is not to that that the improvement is due. Incidentally, it was on investment that the Chancellor


spoke a most extraordinary passage in his Budget speech which has hardly been commented on. He said that private manufacturing investment would probably decline in the next twelve months and, in effect, that the Government would do nothing about it. Anyway, there is nothing in the Budget that could in any way reverse this prospective decline.
Again, one would be delighted if the improvement in our balance of payments and of sterling were due to the fact that we were spending more on research, on technological education, higher education and the rest, but, again, there is not the slightest sign that it is. Indeed, the improvement has coincided with the Government's decision—perhaps the most serious of all their decisions in the last year or two—to cut down plans for further educational expansion to below even what the University Grants Committee recommended; that, in turn, being a good deal lower than many outside experts think we need. The country will pay a very high price indeed in the next ten years if, in fact, the reduction in the plan for education goes through.
Therefore, this improvement that has taken place in our situation is not founded on any of the things that most of us would like to see, but is due simply to the fact that the Government have been holding back the economy and holding back production. They have been applying a policy of restriction and pay pause while other countries are still in a position of greater inflation, which means that our balance of payments has improved relative to theirs. There is no great mystery about this. It is always possible to improve the British balance of payments by holding back our production while other countries go ahead with a faster degree of growth or inflation, but the price one pays—the loss of 1½ years' possible growth—is a desperately heavy price.
One's complaint against the Bill—and against the Budget—is that there is nothing in it which will in any way improve our efficiency as an exporting nation. The Bill contains no encouragement to investment and, as I said just now, the Chancellor apparently views with equanimity the certainty of a fall in private manufacturing investment in

the next year. There is nothing to improve our standards of research, further education, or anything else. As I have just said, the Budget has coincided with a cut in further education plans by the Government.
There is nothing in the Bill that in any way relates to our economic performance which is generally recognised on both sides to be inferior. Presumably, that is because the whole thing has been put on the shoulders of N.E.D.C. About that, no one can say very much, because that Council has only had one or two meetings, and no more. It is difficult to take a clear view of N.E.D.C. Certainly, the top-level side of the organisation is of extraordinarily high calibre. The Chancellor must, at any rate, be congratulated on the No. 1 and No. 2 appointments; they are outstanding people. A number of the people taken in lower down are also of very high calibre, and that I gladly admit because, of course, I want to see the thing succeed.
One must also grant the Chancellor and industry another thing; the calibre of the Council itself is very high. The trade unions have put on the Council their most eminent members and, what is a real change, industry, instead of putting on the good old Establishment figures of the F.B.I., have produced a number of very go-ahead and much younger industrialists. Every previous planning body has been entirely staffed by knights and lords with an average age of about 75; like the members of the Committee on Prices, Productivity and Incomes—all were bald, all knights, and all over 75. They were not industrialists, of course. But in the past, Government bodies and joint councils have usually been staffed by a limited number of rather ageing, though highly respectable, industrialists who were much more politicians than real businessmen. The calibre of the industrialists on this Council is very high, and that, plus the quality of the top staff, encourages one.
The thing one feels doubtful about is, of course, the psychology of the Government and the psychology of the Chancellor. In all the talk about French planning, of which there has been much recently, the point that has sometimes been lost is that it is the psychological factor as much as the physical factor


that is decisive in France. I think that it is not so much the techniques of French planning that have made the thing so successful, but the fact that the people operating the plan have an intense will to get the economy going really fast. It is a psychological attitude. What one questions is whether the will to grow exists in the Government. Sometimes, as one watches the Treasury Bench at work, one has doubts, and when one listens to the Chief Secretary it is difficult to convince oneself that this is the great dynamic leader who will get things moving.
I do not know what will happen. The Chancellor is now making rather more ambitious speeches and there may be some change of heart, although I find it hard to believe. I think that in the Treasury, both in its political leaders and its civil servants, there is still not a real belief in the possibility of planned growth. There is much scepticism in the Treasury due, partly, to the way in which it is recruited. It is typically Old Wykehamist—no, I had better not say Wykehamist. It is typically major public school and Oxbridge classical scholar, supported by the belief that the rounded classical scholar from some unmentionable school and Oxford is capable of turning his hand on one day to pensions, on another to the International Monetary Fund and on another to economic planning and so on—this general cult of the rounded amateur, the cultivated, educated dilettante, which has done this country appalling harm and which has left its mark on most Departments of State. Until two years ago there was scarcely a single British Ministry with a proper research department—not Education, not National Insurance, to take two Ministries with no research departments; but traditionally it has been worse at the Treasury.

Sir Alexander Spearman: Does not the hon. Gentleman think that description inaccurate when applied to the head of the Treasury and the principal deputy and the economic adviser?

Mr. Crosland: I do not wish to mention any names. Obviously, I cannot do so. It would be contrary to the traditions of the House either to praise or to blame particular civil servants. Of

course, there may be outstanding exceptions at the Treasury. I speak strongly about this matter because I feel passionately about it. The number of people at the Treasury with an economic degree is very low indeed. It is slightly higher at the younger levels, but in the higher reaches the number is incredibly low, and to me that is fantastic. I am sorry that I have digressed in this way, but it is a subject about which I feel strongly.
What one comes back to is not the details of this Finance Bill, not even the details of the N.E.D.C. machinery. The whole question will depend in the end on whether the Government have the psychological capacity to give the country through N.E.D.C. the lead which it needs. If I may come back again to the hon. Member for Louth, it is not simply a question of the workers not working hard enough or of the managements not being as go-ahead and as energetic as they ought to be, though both of these things might be true. What is lacking in this country, and has been since the end of the war, is the sense of an economic lead being given by the Government.
A lot of people in industry who would like to see a rapidly growing economy have been intensely frustrated by seeing similar countries in Europe going ahead faster because they have been given a lead by the Government. There have been very occasional indications of a lead on the part of our Government. There was the idea of doubling the standard of living in twenty-five years, and for a time there was a period when industry was given the green light and went ahead very fast indeed. Industry thought that the Government believed in continuous and rapid growth and that there would be secure markets for the goods produced. But, as soon as we got a period of rapid growth, there was always a balance of payments crisis, and the Government knocked the whole thing on the head and a lot of the investment plans of industry appeared inevitably to be frustrated. I am convinced, despite all the arguments about details of planning and the rest, that in the end two-thirds of the planning problem is psychological and not technical or economic. The whole question is whether the Chancellor, the Treasury Ministers


and the Prime Minister have the will to make the plan effective. Looking at them, one must have the gravest doubts.

8.3 p.m.

Mr. Francis Pym: We have had a forthright speech from the hon. Member for Grimsby (Mr. Crosland) and I agree with much of what he said about the importance of productivity. But I think that he underestimated the danger of inflation in this country. The important thing, I think, is not to allow inflation to proceed in this country at a faster rate than in the world as a whole. The speech of the hon. Member for Grimsby was critical and not much of it was devoted to constructive suggestions. It is the general view about the Budget and this Finance Bill that there is no very weighty criticism of it and that such criticism as there is tends to be of a negative kind.
Much attention has been paid to the tax on sweets. It is always regrettable when any new tax is introduced, but I think that, generally speaking, this tax is regarded as fair and reasonable. I fear that there is little hope of any improvement in dental health taking place, since sweets will continue to be consumed to much the same extent as heretofore.
We have heard a lot about the speculative gains tax. It has been hailed as being too light and ineffective and criticised because there is likely to be no yield from it. But the Chancellor has not taken us by surprise since he has done only what he said last year that he would do. Hon. Members opposite were bound to say that this was too little, but I consider it a major reform. It is a major change in the taxation system of the country. Some hon. Members opposite would like a swingeing capital gains tax but I do not think that in the national interest.
I consider that the speculator has a part to play in the operation of the markets of the country and the development of our real estate. Possibly the speculator has been having too easy a time and for that reason it is right to to bring him within the tax net. It is the speculator's business to see that new and economic uses are made of sites and properties, and to have new ideas and spot new opportunities.
Regarding property, any development must conform to planning controls and we are agreed on the merits of that. But beyond this, to discourage transactions in capital or to try to freeze them by taxation would be regressive and unhelpful, in my view. The wheels must be oiled with profits, or the possibility of profit, and if the supply of oil is cut off the engine will seize up. This tax, as it were, controls the flow of oil by making profits from short-term capital deals liable to tax, and I think that a move in the right direction.
I wish to say a word about the tax on television advertisements. I feel that the principle underlying this tax is doubtful, for it is an attempt to extract something extra from television companies and this method is the least unworkable way which has been found to do it. The new tax which was introduced last year is consolidated under this Bill at 11 per cent. It has one serious fault in that its effect and incidence is not equitable as between one company and another. I should have thought that a serious flaw in any tax.
The Chancellor himself admitted last year that this tax would, in effect, become an operating cost on the companies and it seems to be the case that the economies in operating costs which can be effected by large companies working in densely populated areas are substantial compared with those of smaller companies working in sparsely populated areas. Moreover, the rate at which a company can charge advertisers in the dense areas is higher because the advertiser is reaching more homes; and there-fore the market is more buoyant for the larger companies. In this case the tax may be passed on without seriously damaging the companies concerned.
That is not the position with the smaller companies. Last year most of them passed on the tax because they had to. But, as a result, orders fell to an equivalent amount and the tax was handed back in less bookings. Therefore, I say that this is not a fair tax and I hope that it will be looked at again before there is any danger of it becoming a permanent feature of our taxation system. Perhaps later in this year the Report of the Pilkington Committee will provide an opportunity to consider the matter.
While on the subject of television, I wish to refer for a moment to the question of investment allowances and export incentives. I have been provided with evidence from a large company in my part of the world concerned with the manufacture of television sets which shows that the investment allowance of 20 per cent. is enjoyed by television sets purchased for rental businesses and that this advantage is worth about £5 a set. But no such allowance is made for sets sold direct. The rental business account for about 80 per cent. of all the transactions so that a substantial majority of home sales enjoy this allowance. Obviously, this does not apply to exports and, therefore, the export business in this industry is less attractive. It seems that an adjustment is necessary here.
The arguments against a direct export subsidy are, I think, overwhelming, and they are generally accepted, although we seem to interpret the rules more strictly than some other countries. I understand that in Italy, for instance, a television set is subject to a £5 export subsidy. For many of our businesses, exporting is the logical development of their markets. We all want exports from this country to rise. It is a profitable business to go into, but if we do not give direct subsidies for exporting we ought at least to avoid making the home market positively more attractive. Yet this seems to be the position in the industry to which I have just referred, and I hope that there will be an opportunity of making some adjustment.
I turn now to Income Tax. On both sides of the House, we agree that a progressive scale of tax is right. The more a person has, the more he pays. I think that there is a division among us about how steep the scale should be. Hon. Members opposite, I believe, would like it to rise rather more steeply, and some visualise a punitive rate at the top and complain about the amount paid by those at the lower end of the scale. The argument depends very much on what is meant by fair and unfair. I have been studying the Report of the Inland Revenue for the year ended 31st March, 1961, Cmnd. 1598. In table 69, I find that there are just over 20 million incomes subject to tax. Of those, 2,488,000 pay £1,064 million of the tax, and 17,895,000 pay £684 million of the

tax. Putting it in another way, 12½ per cent. of taxpayers contribute 60 per cent. of the revenue, and 87½ per cent. of taxpayers contribute 40 per cent. Also, of course, there are many who do not pay at all.
I wonder whether there is here a pointer to the complaint which my right hon. and learned Friend frequently voices, that we all ask for economy in general while, at the same time, being eager to ask for increased expenditure on particular items. The tax revenue, of course, is the public's money, but is it not true that those who cry loudest for more expenditure are often those who pay the least, and vice versa, those who pay the most, as might naturally be expected, demand economy? I am not arguing against a graduated form of income tax, nor do I suggest any increase in rates; but I doubt that our aim ought to be, as I think the hon. Member for Glasgow, Craigton (Mr. Millan) suggested, to exempt as many as possible from paying anything.
I feel that the deduction of even a few pence or a few shillings per week, though it may be an irritation—a curious way, perhaps, of regarding tax—is also a reminder of the contribution the taxpayer makes to the community and represents a stake in the community. I believe that people appreciate something which they pay for, or contribute towards, and I feel that we should not encourage a large section of people to pay absolutely nothing, even though their contribution be very small. This is the logical development of rising living standards.
In this connection, I welcome the relief which my right hon. and learned Friend has given to old people, the small income relief and the raising of the limit for age exemption. It is not a contradiction of what I have just said to welcome these reliefs. I believe that my right hon. and learned Friend is giving much needed relief to those who need protection from the evils of inflation. The background of the Budget is anti-inflation, with emphasis on competitiveness, implying stability of prices and the increased productivity to which the hon. Member for Grimsby paid so much attention.
Increased productivity flows from increased investment, though not always


in an even pattern. To encourage this, we have investment allowances. These are all very well as far as they go, but I wonder whether we ought not to encourage and reward savers and investors more than we do. The rewards for savings are treated as unearned income; they are singled out for a specially unfavourable rate of tax. If the argument is, as some suggest, that, if we want to encourage exports, we ought to give financial incentives and subsidies to the exporter, it can equally well be argued that, if we want to encourage investors to invest, we ought to give encouragement and subsidies for the reward that flows from it.
I suggest that we should develop a scheme favouring and rewarding new savings. There ought to be an incentive to people to save. The first £15 of interest on a Post Office Savings Bank account is tax-free. Ought not we to extend this principle and say that interest on new savings should be treated at least as favourably as earned income, which in fact, is what such savings are? Saving is a habit. Either a person is in the habit of saving or he is not. Surely, it is the people in the habit of saving whom we should encourage. By treating their rewards for new savings as earned income we should give that encouragement.
The Finance Bill by itself cannot provide the kind of complete solution which it did in the 19th century and at the beginning of this century. It is relatively less important now and other mechanisms are needed. One reason why I welcome the Bill is that one of the regulators is repeated. This is an instrument which has been partly proved by its use last year. I think that it will be a year or two before we can say that it is a completely successful and proven instrument, but I think that the principle behind it is absolutely right, for, while the Budget remains the principal instrument at my right hon. and learned Friend's disposal, he needs other weapons as well. I welcome also the Purchase Tax adjustments not only because they are logical adjustments but because they give a fillip to certain industries which are in need of help.
In welcoming this Finance Bill, I look forward to the next, with its promise of tackling Schedule A. To hon. Members

opposite who regard this as an electioneering stunt, I reply that, by making the announcement now, my right hon. and learned Friend has taken the political steam out of the argument so that, when his promise is put into effect next year, it will be no more than the fulfilment of something already foreshadowed. I look forward also to the revision of company taxation, including, possibly, something on the lines of the payroll tax which was dropped this year. In general, I regard the Bill as an important step forward, and I am confident that the House will give it a Second Reading.

8.18 p.m.

Mr. Richard Marsh: It is always a pleasure to listen to the hon. Member for Cambridgeshire (Mr. Pym) whose optimism is always so refreshing and who is so easily pleased. How he could expect so much from this Bill is difficult to understand.
The hon. Member began by referring to the inequalities in the various tax tables which he mentioned. These, of course, are very striking and real. It is very difficult to understand exactly the point that he was making, because, if these inequalities in taxation prove anything, they prove only the inequalities in income. One of the major criticisms of hon. Members on this side arises precisely from that point. The inequalities in income have become so great, and there have been such major redistributions of wealth among the population, that it is extraordinary that, if the Government felt moved to bring in a Budget at all, they should apparently ignore this point.
Hon. Members on this side have criticised earlier what has virtually been the transference of about £450 million of taxable income from those earning under £1,500 a year to those earning over £1,500 a year. One thing which we on this side should have liked the Government to do in the Budget was to have another redistribution of incomes so that they may cancel out some of the unfairnesses and inequalities which have resulted from deliberately applied policies over the last seven years or so.
I hope that, if we achieve nothing else during the debates on this Bill, we shall be able to bring home to people, par-


ticularly those earning between £1,000 and £1,500 a year, who have hitherto believed that their interests were being carefully and closely guarded by right hon. and hon. Members opposite, how much they have paid out of their own pockets for Government policy over recent years.
The hon. Member for Cambridgeshire listed among his priorities the need for relief on unearned income from investment and savings. This one has been flogged a little too hard. The arguments in favour of differential taxation, in so far as they exist—the differences between the two are very small indeed—are self-evident. There is no criticism of the investor or of the person living on savings. The fact is that capital and the income from capital provide advantages over normal earned income. If a person's income is derived from capital, he benefits in several ways. He can transfer his investment, and there is the security which goes with capital. Things like these are themselves of value to the person who draws his income in this way.
One thing which worries me about the Budget—I suppose that this is a criticism which could be made of successive Governments—is the extraordinary situation in which we find ourselves in that we appear determined to have a Budget and Finance Bill each year whether we need them or not. It is obvious from the Bill that the Chancellor of the Exchequer and the Treasury thought carefully about the economic position and discussed among themselves what they should do, and decided not to have a Budget.
There is nothing in this Budget which makes a major impact on any part of the economy. There is certainly nothing in the Bill to justify the ritual on which we shall embark for the next few weeks. That is no criticism of politics, but, it is difficult to find time to debate the many things which we should like to debate, I wonder whether we should continue to deal with a Finance Bill in this way and whether the contents of the Bill necessitate that sort of treatment. Nothing in this Bill necessitates major examination over a period of weeks by the whole House.
I know that this argument has been put forward and considered on previous occasions and, I believe, by Select Committees on Procedure, but for a House of Commons which is so sensitive to any suggestion that it should delegate its business and which finds itself so short of time to deal with legislation, this is a classic Budget on which to base arguments as to whether we should have an annual Finance Bill if we do not really need one. If the House of Commons feels that it must continue to have an annual Finance Bill of this magnitude and must devote a great deal of time to it, I only hope that future Chancellors of the Exchequer will find something to put into it.
I never have been and probably never will be one, but I suspect that the Treasury officials who permanently have to suffer the iniquities of a variety of different Chancellors of the Exchequer have bonnets positively full of bees. Every time a Chancellor totters on the brink of wondering whether to break this annual ritual and decide not to have a Finance Bill one year, he says, "There are all sorts of taxation which should be tidied up", and Members of Parliament waste a great deal of time in tidying up a lot of minutiæ.
If we on this side of the House, faced with this Finance Bill, wanted to make changes, I would have thought that the big change that needed to be made at this stage was the redistribution of incomes. There has been over the last few years a quite deliberate policy by right hon. Members opposite to redistribute incomes from the lower end of the scale, and the surplus to the higher end of the scale. I should like to have seen a Finance Bill which dealt with taxation primarily in terms of income allowances, with which the hon. Member for Cambridgshire disagreed very much. I was fascinated by his suggestion that we should tax everybody, even if it were a matter of only pence, because this was good for their immortal souls. This might well have some validity, but it would be devilishly expensive to the State in collecting the very small sums that were involved. There is no case at all for taxing people at the lower end of the scale at the present rates.
I felt at the time that the arguments put for the reassessment of Surtax levels


in the last Budget were reasonable arguments. I think that very few hon. Members on this side of the House disagreed with the logic of the case which had been put for some reassessment of Surtax levels. In each case the dispute was not about whether there should be an adjustment or a change, but whether this was the most pressing priority of all tax changes.
It is significant that the Government, having £87 million to spare, had to make a choice. One could put up a good argument for both. One could put up an argument for income allowances particularly on the lower incomes. There is also a logical argument for the Surtax levels. Faced with the clear choice between the man earning an average of £50 a week and the man who is at a level far below the average earnings, hon. Members opposite had not the least bashfulness in offering £87 million to those at the top rather than at the bottom of the scale.
I should like to see more of the lowest income groups completely exempted from taxation. This is the pattern which taxation policies in the Budget should take in an endeavour to relieve as many people at the lowest end of the scale as possible and to ensure that there is a slight redress in the balance in and in the difference which has occurred in recent years through the Government's policy
My big criticism is the one made by my hon. Friend the Member for Grimsby (Mr. Grosland), in what I think both sides will agree was an impressive and entertaining speech. The point made by my hon. Friend is what worries all of us. There is no longer any dispute between the two sides of the House that the position of the country in the world is not a good one. He would be a very ardent Conservative, or a foolish one, who would say that he was happy with Britain's position vis-à-vis the rest of the industrial world. This country, which used to be the biggest industrial Power, or one of the biggest industrial Powers in the world, can now only brag that we are knocking the Luxembourgers into a cocked hat when it comes to industrial productivity. This is not something which pleases anybody, and we are now agreed that there is something wrong and very unhealthy about Britain's competitive position industrially in terms of productivity.
There is nothing whatever in the Budget that attempts to make any contribution to that problem. If we accept, as we all clearly do, that it exists, and if the Chancellor has a Budget of this nature in which he is not under enormous pressure, the Government should have stimulated incentive to try to push Britain ahead until it was neck and neck with Belgium at least and to try to make a stride forward in our comparative position.
Industry must be given financial incentives to make it do the right things. Investment incentives are always mentioned. I should like to see much more substantial allowances and greater encouragement given to technical and apprenticeship training, in which we lag behind and from which, in consequence, we suffer.
Finally, in passing, I come to Schedule A. The hon. Member for Cambridgeshire glossed over this and its electoral implications rather speedily. Schedule A has been campaigned for over many years. It affects 6 million house owner-occupiers. The Government find that they cannot do anything about it this year. A couple of weeks before the local elections, we have the Budget and the Government take the unusual step of saying that in the course of the Budget debates they will tell us about something which it does not contain. They give no guarantees about what they will do, but say that they are thinking of doing something next year. We do not know what they will do.
I would willingly lay bets that the Government will not abolish Schedule A. Next year, we may get a reduction of up to the first £15 of Schedule A and a promise of jam to come after the General Election. All Chancellors have to be optimistic. The present one has lived on nothing but optimism since taking office. He has little else to show. After the next election, however, any Chancellor could say that the position was different and the country was facing a balance of payments crisis, which is a fair bet, as happens every two years or so under the present Government and sometimes even twice a year.
I do not believe in the imposition of Schedule A on small owner-occupied properties. When applied to the person


who owns several houses it is justifiable, if only for the amount of room he occupies, but I have never believed in the taxation of notional incomes in this way. The argument which is adduced in support of it is most unjust. Very often, the arguments that are put for the gathering of Schedule A are valid only if we regard the purchase of private homes as a form of speculative investment. Most people never sell their houses. They never reap the £2,000, £3,000, or £4,000 from them. Virtually, they merely pay rent and they never see their capital.
We on this side are determined to seek changes in the Schedule A position. We put down Amendments last year, and probably will do so this year, naming certain figures. The Government, however, who are in a position to determine what to do about Schedule A, have not put forward any figures. All they tell us is that they think of doing something next year, but they cannot say what it will be.
After the rather bitter experiences just before and immediately after the 1959 General Election, few people, thank goodness, are likely to trust the Government's views on Schedule A. I hope, therefore, that in the course of this debate, leaving aside the well-worn league tables, both sides of the House will get down to a method by which the country can again be got moving on a programme of long-term planning and growth so that we might again have a country with industrial stability.

8.35 p.m.

Mr. Marcus Kimball: I do not think that we can quite agree with the hon. Member for Greenwich (Mr. Marsh) that a Finance Bill of about 70 pages is an entirely negative Measure and not worth the consideration of the House. I agree with him, however, when I say that I hope we shall not see the total abolition of Schedule A. I go the whole hog with him for its abolition for owner-occupiers of property below a certain rateable value, but I do not think that many would like to see its abolition and the removal of their maintenance claims over and above a certain property value.
I should like to say how much I enjoyed the speech of my neighbour, the hon. Member for Grimsby (Mr. Crosland), but that as one of the younger Members of the House perhaps I ought to say what an experience it was to hear such an old-fashioned, bitter and antiquated Socialist speech from the hon. Member for Ashfield (Mr. Warbey). People may complain about the difficulties of getting the electorate worried and enthusiastic about politics. They have only to read the speech of the hon. Member for Ashfield to realise what is at stake if the Socialist Party comes to power. It was the most depressing and tortuous speech that I have ever heard in the House.

Mr. Charles Pannell: We have heard more depressing speeches from the hon. Member's side of the House.

Mr. Kimball: Time is short and I shall not attempt to embark on any arguments about the higher economics of the Bill. I should like to deal entirely with two new direct taxes which are involved in it and, in particular, to refer to the tax on foreign real property. I ought to declare some sort of indirect interest in the subject. I do not see how the Chancellor of the Exchequer gets his figure of £2 million as the yield from a tax on foreign real property. It has never been necessary for anyone with foreign real property to declare the value of it in the probate and, therefore, I do not understand how my right hon. and learned Friend gets the figure for the yield from this tax.
Many people will have noticed that The Times, in a leading article on 11th April, deprecated this step. Subsequent correspondence in the columns of that newspaper has shown that this tax is once again a retrospective and un-Conservative measure. In general, I cannot help feeling that it is a thoroughly unwholesome tax and displays a most unwholesome tendency in a Conservative Government.
The history of this matter is that there was considerable agitation in Canada in the first instance that a tax should be introduced on foreign real property. When Canada introduced the tax it was the cause of certain comments in the


Press in this country, but the position in Canada is entirely different from that in the United Kingdom. Canada is an enormous country, with vast resources, few people, and a limited amount of capital. Canada wanted its own capital to develop its own country and not to have it used to develop countries abroad.
The United States Government, since the publication of the Finance Bill, have introduced into Congress some form of tax on foreign real property. It is interesting that the tax which they have introduced does not become effective until January, 1964, unless the property has been bought since January, 1962. They are giving people who are genuine investors abroad time to put their house in order before they suddenly find this form of investment subject to death duty.
This country has traditionally prospered by sending capital abroad. We must never forget the real value of British investment abroad and what a saver it was to the country in the difficult days of 1940. The Government were able to collar those assets and use them to pay for the war and Lend-Lease. The investment of British capital abroad produces an enormous credit balance on our export side. It is something that does not require the import of a large amount of raw materials.
As well as this, there is the immense advantage to our Colonies through the movement of private British capital into them. People may say that, because of the death duty concession on foreign real investment, this capital has gone into the Colonies at unrealistic rates of interest. But the Colonies could not have obtained or used this capital for the development of buildings, the tourist industry, hotels and other things if it had not been for the Estate Duty concession.
After all, there is a very considerable risk in putting money into Kenya and many other places in the Commonwealth these days. The Kenya Government have found it necessary to abolish death duties in order to encourage British capital to go there. I hope that the Chancellor will look at this provision again and realise that it is not just a question of "spivvy Jersey mortgages" purchased on somebody's deathbed in order to avoid these death duties.
These "Jersey mortgages" are of an exceptional character. I am not a lawyer, but in Clause 24 it should be possible to include those mortgages as dutiable without bringing in all foreign real property. We should not regard all investment in Jersey, however, as being entirely to avoid death duties. In 1957, for instance, the interest rate here was at 7 per cent. but the law in Jersey made it impossible for people there to borrow money except at rates under 5 per cent.
The Jersey Government, to build up their public works programme, had to come here and borrow money at under 5 per cent. which they got because of the death duty concession, and that was used for public works and for waterworks development. I hope that my right hon. and learned Friend will look carefully at this again and not regard all investment in the Channel Islands as purely a way of saving death duties.
What I find objectionable in Clause 24 is the retrospection when it applies to property bought before this Finance Bill. After all, it would be perfectly possible and legal for somebody to have been given a gift of foreign real property perhaps last year, for the person who gave that gift to have died, and for the person who received the gift—which, by all the rules of the game, was perfectly legally free of duty—to have spent it, or to have made a marriage settlement, or to have tied it up so that it was no longer available, and yet still find himself, under Clause 24, saddled with a bill for duty which he did not expect to get and which he could not possibly pay.
We had all these arguments over the "vanishing horse" and the vanishing assets during the passage of the Finance Act, 1957, which I will not repeat as there is not time tonight. The same arguments also applied when the time for the payment of duty on gifts inter vivos was then extended from three to five years. All those arguments apply to foreign real property. I hope that my right hon. and learned Friend will see his way to meeting these arguments, as they were met then. If he cannot see his way to doing so, I hope that he will at least, as a bad second, confirm that the same concession that exists on agricultural land, forestry and the payment of duty over eight years on real property in this


country will be extended to people who have supported the Colonies and looked after the Commonwealth by investing their money abroad to help raise the standard of living in our Colonies.

8.44 p.m.

Mr. Charles Pannell: I hardly think that the points put by the hon. Member for Gainsborough (Mr. Kimball) constitute the sort of cause that will give a rallying cry to offset Orpington up and down the country. He started his speech in a most unfriendly fashion. He seemed to consider that the Speech of my hon. Friend the Member for Asihfield (Mr. Warbey) was typical of this side of the House. I want to say that one of the great joys of the House of Commons is its infinite variety. There are all sorts of people on his side with whom he would not like to be compared. I think that that is quite a fair point. The similarity between the hon. Member for Gainsborough and the hon. Member for Louth (Sir C. Osborne) is most marked, but neither would want to be confused with the other.
Getting up at this time of night and in a Chamber with this attendance brings me back to something which ought to be considered at this stage—whether the House is to continue year after year taking the Finance Bill in the way we do. I was a member of the Committee on Procedure which sat for a long time and carefully examined many schemes. There was the scheme of Sir Edward Fellowes who suggested that at least one day a week of the time of the House should be given over completely to Committee stages, so that on one day there would be no business conducted in the Chamber. A suggestion that attracted me was that we should have two Finance Bills each year, one to renew existing taxation, which would be taken upstairs, and the other dealing with new taxation, which would be taken on the Floor of the House.
I hope that I am as fastidious a constitutionalist as most hon. Members and I appreciate the argument that new taxation should be put before the whole of the House and that the viewpoint of any constituency should be put by the Member for that constituency. A Finance Bill may contain a provision of special interest to a constituency and it would

have to be possible for the hon. Member concerned to state his views. The greatest objection to having a Finance Bill sent up to a Committee, even a Committee composed strictly according to the size of the parties, is that it might somehow debar an hon. Member from expressing a certain point of view on behalf of an individual constituency, a trade, a vocation or an avocation about which he thought that he had something to say.
But I am not sure that that argument applies to what might be called continuing taxation, where present taxes are merely continued in their present form. Such a Bill could easily go upstairs. The great enemy of the House, the enemy of not only the Government but the Opposition, is time. We do not have enough time to discuss all the things we would like to discuss.
There is a legend—and it is only a legend—that debates in another place are somehow rather better than ours. They are not. They are more academic. The Members of another place do not have the spur of a constituency and when I go there I feel rather sad because I see there the great men of yesteryear. Proceedings there are merely debating exercises. If we had more topical debates, there would be a greater sense of urgency.
I understand that a gentleman who used to be on this side of the House and who has been in the other place for four years has said that he has no wish to come to this end of the Corridor. I cannot say very much about that because I remember the Committee on the Lords and Commons and the matter is highly privileged or sub judice, but I can say that not even in my wildest dreams do I want to go to the other end of the Corridor.
There is another aspect to the Finance Bill, Which is that our old financial practices are almost born of a pastoral society and not of an industrial society. They are concerned with the rotation of the crops. We take the Finance Bill at the beginning of April which is the beginning of the Income Tax year. An organisation and methods department applying itself to the Treasury and the business of the State could work out the waste of man-hours in our present system of taxation.
Every modern State—and I am not making an ideological argument here because I could draw examples from America or Russia or India—considers three or four or five-year plans. China tends to consider ten-year plans. When we consider the erosion of time spent considering the Finance Bill and continuing taxation in the House, it seems that it is time that the House should consider bringing itself up to date.

Sir C. Osborne: Would not a five-year economic plan require longer Parliaments?

Mr. Pannell: If I allow the hon. Member for Louth to inveigle me into dealing with that I shall be outside the scope of the debate. If we are considering things constitutionally, then I believe that five years is long enough.
I am not making a political point but showing one of the difficulties from which the House is suffering. I want to be inoffensive about this and in saying that we have had ten years of Conservative rule I do not mean it in the way it might sound. I mean that ten years has been the length of time during which one Government has been in power. After all, there are hon. Gentlemen opposite who are waiting for the next General Election so that they can retire. The political pendulum is not only a reality but a necessity for British politics, and I am sure that hon. Gentlemen opposite of all sorts who came in at the last election have had serious doubts since Orpington. I am referring to the Ford motor car salesman type; the new Conservative, if I may call him such, who came in at that time.

Mr. Deputy-Speaker (Sir Robert Grimston): Order. I am sorry to interrupt the hon. Member, but I think he knows that he is going a bit too wide of the Bill now.

Mr. Pannell: I thought that this Finance Bill was wide enough for almost anything. I certainly do not want to fall foul of the Chair, although, after all, along with the Finance Bill one must surely consider the future of Parliament and, in this connection, if we do not get men of sufficient quality that will certainly be a gloomy state of affairs. But I will not stray too far, except to say again that the political pendulum

is a necessity to the British Parliament to give it spur, urge and new policies.
One can remember how hectic was this House at the time of the 1950–51 General Election, and I do not want there to be another shoestring like that in any Government. I rather think that hon. Gentlemen opposite, in the words of Cromwell, have
… stayed for far too long for any good that they may do.
It may be that circumstances similar to those prior to the 1950–51 election are being repeated. At that time there had grown up a generation of young men and women who did not remember the pre-war days and all that went with them. They tired of the Welfare State and were not thinking in terms of austerity and tended to associate the Labour Party with that sort of thing. That generation grew up, and, as a result, put hon. Gentlemen opposite in power. We now seem to have turned the full circle and they have tended to get tired, too, of the affluent society. I am referring to "affluence" in a sarcastic way—something that gives only material benefits and affluence and does not necessarily bring culture and the right use of leisure with it. They are beginning to realise that the country badly needs a new Government with new ideas.
When this new Government comes in—whether that be in a long or short time hence—the time cannot be too long delayed when we must again look at the whole financial machinery of the State and of having a more rational way of levying taxes and continuing the existing ones.

8.53 p.m.

Mr. Leonard Cleaver: I listened with great interest to the remarks of the hon. Member for Leeds, West (Mr. C. Pannell) and to those of the hon. Member for Greenwich (Mr. Marsh). The latter suggested that perhaps we do not really need a Budget on this occasion while the former suggested that we might have a Budget with different Bills presented in a different way.
It is advisable that the country has an annual period to consider its accounts. My experience is that if people do not consider their accounts annually those accounts get into a mess


I agree, however, that the Budget should be split in two—with one Bill covering the levying of taxes and another dealing with the administration of those taxes. As the hon. Member for Leeds, West pointed out, they could be considered upstairs When a great dead of time could be devoted to them. If I had the time—

Mr. C. Pannell: You can go on.

Mr. Cleaver: —I could go into this matter in greater detail.

Mr. Callaghan: There is no time limit.

Mr. Cleaver: Then I am luckier than I thought and hon. Members will have to be bored for even longer. I must say, however, that I support my right hon. and learned Friend's Budget. I am extremely pleased that after having approached the difficulties and having faced up to them, sometimes in an unpopular way, perhaps having to do things that are rather unpleasant, he has stuck to his proposals and even when election results have gone against him he has not tried suddenly to bring in a soft Budget. It would have been indefensible had he done so. As my hon. Friend the Member for Louth (Sir C. Osborne) said, we would rather see an election lost on that basis than have a cushy Budget at the wrong time. We would not like to see our finances ruined for political gain.
I am critical of some aspects of this Finance Bill—not of what is in it but of what is left out of it. We spend a great deal of time in our constituencies, I certainly do in the City of Birmingham, trying to persuade as many manufacturers as we can to export more. As soon as we do that we are asked, "What are the Government doing to help us? Every time they pull our coats from behind." I am not suggesting that we want financial incentives. That would be a mistake, but I do not think that we should levy taxation in such a way that the raw materials for manufacture put up the costs, make exports more difficult and increase home prices. We get into extraordinarily difficulty in that way.
I cite one example, and that is the duty on light hydro-carbon oils. There

is a duty put on a raw material which goes into manufactures. If we export it there is a rebate, but there is no rebate if it is exported as an indirect material part of a manufactured article. It forms a basic part of paint, boot polish and rubber. If it is exported on the side of a ship or on the body of a car there is no rebate whatever. If it goes into the making of tyres and tyres are exported, there can be no rebate. We are putting up the costs of manufacture and making it more difficult for our industrialists while at the same time saying. "Go out and export. We are dependent on you."
My right hon. and learned Friend made a statement in regard to Schedule A. Some hon. Members want that to be applied only to owner-occupiers, but I want to look at it from a more technical point of view. I am, of course, in favour of relieving owner-occupiers as soon as possible, but is not that method of collection of tax a complete waste of time? The ordinary landlord gets an additional assessment and the manufacturer who pays Schedule A on his premises pays on 1st January and is allowed to deduct that payment from the assessment accounts at the end of the year when he is assessed on the profits for the year and not on the occupation of property. I should have thought we were wasting time in that way and that it is quite unnecessary. I hope that when my right hon. and learned Friend makes an adjustment of this tax he will do it thoroughly.
Another matter in which I think we are being extremely silly is the taxation of industry generally. We have Profits Tax and Income Tax and, basically, those taxes are levied on the same initial profits. Of course there are some differences in the computations and wear and tear affect the profits. I should like my right hon. and learned Friend to say that he will consolidate those two taxes and make a real corporation tax. We should then get away from the difficulties experienced when businesses start and on their cessation when one of the years is taxed twice while sometimes one of the years is not brought into charge at all. That is a waste of time. Why not look at the whole question of the basis of assessment and bring it on to the current year's basis instead of having


the complicated system of the previous year which sometimes is not even understood by manufacturers themselves?
I have mentioned the question of profits on which the tax of the company is computed. It annoys a manufacturer to be told that he has to pay tax on a figure which is different from the one that he has in his ordinary accounts. I think that we should do away with the calculation of wear and tear. The ordinary company passes its depreciation in the board room. It adopts an established and regular practice for dealing with it. It puts it into its costs. It includes it in its annual accounts. It is prepared to make it public and let everybody see it. It puts it before the shareholders at the annual general meeting.
Why, after all that, cannot it go to the Inland Revenue as well? It may be said that the Revenue is afraid that companies will write off all their tax in one year. I do not think that they would, but supposing they did? So what? If they wrote it off in one year, they could not write it off in the next. I agree that we do not want abuse and that a regular flow of tax is desirable, but why go through the complicated business of making a separate calculation?
What happens in industry itself? The ordinary limited company keeps one plant ledger for depreciation purposes for its financial accounts and employs another clerk at another table keeping another ledger to ensure that the company gets all the little bits of wear and tear to which it is entitled. This is a sheer waste of time.
I should like my right hon. and learned Friend to investigate this question of the taxation of company profits. It is even more complicated than I have suggested. We provide an investment allowance to encourage people to put in plant, but we then tax them with Profits Tax and Income Tax. Is it necessary to do both? I should not have thought that it was.
To all that we are adding the problem of the rate burden, and I think that it will be a heavy one. I do not think that this will encourage manufacturers or make our export position easier. I hope that the points mentioned by my right hon. and learned Friend in his Budget speech, that the tax would be investigated and that inquiries would be

made to see whether some sort of simplification could be brought in, will prove effective.

9.2 p.m.

Mr. James Callaghan: The hon. Member for Birmingham, Yardley (Mr. Cleaver) made a number of interesting suggestions. I do not think that he would claim sole proprietorship to them all, and I am not sure that I could go all the way with him on them all. Nevertheless, he said a number of valuable things.
The hon. Member speaks from considerable practical experience, but I think that he ought not to abuse his right hon. and learned Friend the Chancellor too much, because I think that the Chancellor is probably a tax reformer and is finding that the difficulties of bringing about administrative changes are weighing too heavily upon him with his other preoccupations. I fancy that this is a long job, but I should like to see us moving in some of the directions referred to by the hon. Member for Yardley, and I hope that he will continue to press the Chancellor of the Exchequer. Who knows, the hon. Gentleman may even have the opportunity of supporting us in the Lobby on one or two of the ideas that he has put forward.
Reference has been made many times today to the Chancellor's speech at Sheffield, and to many things not in the Finance Bill. There has been more discussion about matters not in the Bill than about matters in it. This is because there is nothing of great importance in the Bill. What is of importance and could have been included has been omitted. We are, therefore, bound to discuss extraneous matters.
To me, this has been a rather depressing day. The House has been almost empty all the time. There has been no great rush from either side to take part in the debate, and this in itself is a reflection on the nature of the Bill. Yet there are some important problems that we ought to be discussing, though if I trespass too wide no doubt I shall be out of order. I think that what my hon. Friend the Member for Leeds, West (Mr. C. Pannell) said about reforming our procedure ought to be further considered by the House so that we can


use our time to the beat possible advantage.
We have had one or two excellent speeches. My hon. Friend the Member for Glasgow, Craigton (Mr. Millan) was right on the ball in what he said about the way in Which the Chancellor's proposals and the Government's fiscal measures are falling upon the shoulders of the smaller taxpayers. My hon. Friend the Member for Grimsby (Mr Crosland) restored the almost forgotten art of debate in the best sense in the House. He made an absolutely outstanding speech in picking up what had been said by the hon. Member for Louth (Sir C. Osborne) and by the right hon. Member for Flint, West (Mr. Birch) and subjecting the right hon. Gentleman to a devastating analysis which he must have been glad not to have heard. I hope that the right hon. Gentleman will have sufficient humility to read it, but I very much doubt it.
My hon. Friend the Member for Grimsby has not made a major speech on the Finance Bill for some time. [An HON. MEMBER: "Where is he?"] My hon. Friend sat here all day until the last few minutes. He has now gone to get some refreshment. He is entitled to do that. Other hon. Members who have spoken in the debate have only just reappeared, but I do not wish to particularise. My hon. Friend is perfectly entitled to go away. I hope that we shall hear him many more times on the Finance Bill, because he will be a great source of trouble to the Government if he spends his time on it.
When my hon. Friend the Member for Sowerby (Mr. Houghton) referred to the Chancellor's speech in Sheffield, the right hon. and learned Gentleman interrupted him to say that when he was referring to disturbances abroad or stupidities at home he was speaking about exports. However, I think that the Chancellor will agree that that is only half of what he was talking about. He was, in fact, talking about the balance on current account in 1962. In his new rôle as "Sunshine Selwyn" he was telling us quite clearly that sterling was secure for the moment and he expected the balance to be much better in 1962 than it was in 1961. He was painting a very different picture from the one we have become accustomed to from

him for the last nine months. Of course, we have heard it before.

Mr. C. Pannell: The elections are near.

Mr. Callaghan: My hon. Friend is in a cynical frame of mind if he thinks that the Conservative Party is ever influenced by electoral considerations. It is odd how their judgment on the economic situation varies with the electoral position. I will put it no higher than that. We have heard this before. It so happened that the Government firmly and resolutely believed immediately before the 1959 General Election that all was well. I have here a cutting from a famous newspaper. It says:
Mr. Macmillan … strode into the election battle yesterday with this claim: 'I do not remember any time in my life when the economy has been so sound …'
This was said eight or nine months before the beginning of the most sustained attack upon the strength of sterling that we have seen since 1949—I quote the Chancellor's most recent speech.
The Prime Minister also said in September, 1959; according to another newspaper:
The £ was strong. The balance of payments was buoyant. 'Prices are stable. … Taxes are lower … Britain's economy is now sounder than at any time since the First World War.'
That was on 25th September, 1959. It is strange that somehow the Tories' assessment of the economic situation seems to vary according to where we are getting to electorally.
The Government will have some difficulty in ridding themselves of the charge that their assessment of the economic situation—I do not refer to the Chancellor in particular, but to the Government in general—is dependent upon when the election is to be. I further assert that the Government could have given reliefs of taxation to the lower income groups this year if they had not preferred to save them up so that they may distribute more largesse when the next General Election gets nearer. I shall demonstrate that, according to my judgment, a little later.
I beg the Government to beware of making the people too cynical about their performance. We have seen these


volte-faces before. We have seen another example today; London County Council education is now apparently, so I read on the tape, to remain untrammelled and unchanged for the next decade. I am delighted that it should be so. I am very glad that the Government have yielded to pressure here, as we have seen them yield to pressure in so many other matters, whether it be Archbishop Makarios and the passage through the Suez Canal or a number of other matters with which the right hon. and learned Gentleman was connected in his former administration. I do not mind them yielding to pressure, especially if the pressure is right, as, certainly in the case of the education services of the London County Council, it is right.
What is the country to make of a Government who commit these follies and blunders which only public pressure can correct? These electoral considerations seem to be coming in, but I do not believe that this change will affect whatever is to take place in the Metropolitan boroughs elections next week. Hon. Gentlemen opposite may think so; I think that they are wrong, because people have at last come to the point where they do not trust the Government to behave in a straight and honourable way about the problems facing them, but do believe that the Government consider their own electoral advantages. It is a dangerous thing for the country when the Government are held in such disrespect by such a large number of the people.
That is one reason why we ought not to delay the General Election for too long. If the Government can command only a relatively minor degree of support from the people, we are entitled to see that we do get a Government who do have the active support of the people. The country cannot be well governed while the Government themselves are neither held in respect nor command a majority.

Sir C. Osborne: Who is talking party politics now?

Mr. Callaghan: I am talking party politics in the sense that the Government's actions in the last few years have helped to destroy the confidence of the people in their honesty. The hon.

Gentleman is a great connoisseur of honesty, as well as of hard work.

Sir C. Osborne: At least, I have worked hard since I was 14, and I know something about it. As for my honesty, I do not think hon. Members on either side of the House would question that.

Mr. Callaghan: The hon. Gentleman need not be so sensitive. I always admire his speeches. They have that touch of integrity with which many of us were brought up. The hon. Gentleman has heard what my hon. Friend the Member for Grimsby had to say in his analysis of the hon. Gentleman's economics, and I hope that he will complete his own speeches in the House by taking account of what my hon. Friend had to say about the realities of the situation. I am not saying that the hon. Gentleman does not work hard, or that he is not sincere, and I hope that he will not be too sensitive about it.
I want to say something about the figures given by the Chancellor in his Sheffield speech. He expected that the balance on current account in 1962 would be much better than it was in 1961. He relied on statistics contained in the Balance of Payments White Paper (Cmnd. 1671). These figures are in Table 1, on page 9, to which the right hon. and learned Gentleman referred. The table gives the current balance or deficit on our trade and invisible income, and each year the previous year's figures are included, so that we can compare them, In my innocence I expected to see the same figures for the same years in the successive tables, but my right hon. Friend the Member for Battersea, North (Mr. Jay) obviously knows better. This is simply not so.
Let us take the figure of £288 million, to which the Chancellor referred. He said that in 1960 our deficit on current balance was £288 million, and that last year, 1961, it was only £70 million. The figure of £288 million was the one upon which he was basing himself, but if he looks at the previous year's figures he will see that that £288 million was, in fact, £344 million, a difference of about £60 million, which is a quite remarkable gap. I do not want to discourage statisticians from producing figures as soon as they can, but I do want to discourage the Chancellor from placing too much reliance upon them.
Let us take the year before, 1959. This is where Chancellors can go very much astray. The current balance shown in the 1959 White Paper is £115 million—not doing so badly. If we look at last year's White Paper, on which I have no doubt the right hon. and learned Gentleman relied, the current balance was shown as £51 million, and if we take the 1959 White Paper, for the same year, the current balance was shown as £145 million. What are Chancellors to do? I have some sympathy with the Chancellor. He is here faced with a swing of £100 million on our current balance, and he is supposed to make deductions about what to do with the economy on figures that are as unreliable as that. When we can get a swing between what are, admittedly, the two extremes of £145 million and £51 million for the same year, and the same statistics produced—presumably other information has since come to light—we are made extremely sceptical of the figures.
Where does the responsibility for this lie? With the Chancellor? No, I do not believe that. There is no need for the right hon. and learned Gentleman to assume any more crosses than he has to carry. He has plenty already. I shall assert that the responsibility lies mainly with the Bank of England and, if that is so, I want to ask the Chancellor what he is doing to ensure that he gets more accurate information at an earlier date.
These figures are of momentous importance to the future of the country. They influence very substantially the level of our gold and convertible currency reserves. It is on the basis of these balance of payments figures that the foreigners determine their view about the state of our economy. Over the last few years the international bankers in Zurich have been forming judgments about our economic policy and economic performance on the basis of wildly inaccurate figures supplied by ourselves.
As is well known, the Chancellor, the Treasury and the Inland Revenue always take the most pessimistic view of these figures. That is by tradition, over the last century—long before the right hon. and learned Gentleman and a number of his predecessors had anything to do with it. Therefore, on the basis of figures that are as wildly inaccurate as I have

shown them to be, the Chancellor introduced a pay pause, he broke arbitration agreements, he interfered with the Arbitration Court itself, he brought down upon himself a very great deal of obloquy, he tightened up on hire purchase, and he put up prices all round—all on the basis of figures that are completely inaccurate, and which may be corrected yet again before another twelve months are out.
I am willing to make a modest bet that the figures now in the White Paper will be corrected yet again when we get next year's White Paper. All I say to the Chancellor is that I think it was extremely dangerous for him to have relied in his Sheffield speech on figures as inaccurate as these.
If we take the information we have, what are the objective changes in our own internal situation that could make the Chancellor so much more optimistic, as he was in his recent speech? According to his statistics, imports are only one-half of 1 per cent. less in March than when he introduced his emergency measures. Exports are 5 per cent. down. If we were doing well, they should be up, but exports are 5 per cent. down, taking the single month of March against the single month of August. Production is 2½ per cent. down.
If we take the effects of the pay pause, 7 million workers have received increases amounting to £2·6 million a week and, in the corresponding period of last year, 9 million workers received increases of £3·2 million per week. On those basic statistics, can anyone say that there is anything in the Chancellor's measures that have brought about such a degree of internal recovery that we are in a position to face the world?
What has happened, as the Chancellor knows—as, indeed, he has said—is that adventitious events in other countries are floating the British economy off; and this, as was pointed out by my hon. Friend the Member for Grimsby, is where the right hon. Member for Flint, West is so wrong. It is not what the Chancellor has done which has helped to improve the British economy, but what has been going on in other countries which happened fortuitiously to coincide with the measures taken here by the Chancellor. That is the real answer.
I do not mind hon. Members opposite deceiving themselves about the effects of the measures taken by the Chancellor, but I wish that they would give up trying to mislead the public about them. I have no doubt that the hon. Member for Weston-super-Mare (Mr. Webster) sincerely believes that everything that the Chancellor has done has brought about the present position. I assure him, equally sincerely, that it had little to do with the present position. I listened with interest to his view that the reason for the large-scale growth in Germany and France and other continental countries is that they have a much higher ratio of indirect taxation to direct taxation and that, therefore, he wishes us to move in the direction of indirect taxation. I should imagine that he would have to go a long way to prove that.
What the hon. Member must pause to consider, on his way down that primrose path, is that, as he knows, indirect taxation is the most regressive and backward-looking form of taxation. If one follows social justice at all, and if one is concerned about equality and the redistribution of incomes, towards direct and progressive taxation is the right way in which we should try to focus our own fiscal system. We know that the Government are not interested in the economy. We have had it in the words of the Leader of the House. I have just spotted that the right hon. Gentleman is in the Chamber. He told us, in a speech during the debate on the Address, that he thought that on this side of the House equality had many noble chords which echoed in the heart, but that it found no awakening echo there—on the Conservative side; and I am sure that the right hon. Gentleman is right. It does not.
I shall demonstrate to what extent and to what lengths his philosophy has led him when I come to look at some of the taxation figures, and we shall see whether equality should not begin to awaken a chord, even in the heart of the right hon. Gentleman.

Mr. Webster: The hon. Member has talked about stimulating earnings in industry. How, at the same time, does he press the point that we should continue to have a higher level of direct taxation than most countries in Europe?

Mr. Callaghan: I am sorry, I was not

making that point at all. The only point I am making is that I prefer direct taxation to indirect taxation—

Mr. Geoffrey Hirst: That is because the hon. Gentleman is a Socialist.

Mr. Callaghan: Of course it is because I am a Socialist, but it is also because I believe that taxation should be related to the capacity to pay. I know that the hon. Gentleman does not, but I do.
I believe that people should contribute to the welfare, defence and the educational system of the country and to the needs of old-age pensioners in proportion to their capacity and their incomes. My goodness, if we have to start arguing that all over again, where have we got to in this House? This is the case for direct taxation and that is what I stand by, and so does the whole of the House—and the Leader of the House will have to face this matter in due course.
There are a number of tests to be applied to the Finance Bill. The first of them is: does it raise the right amount of revenue? Here, I venture the view—this can only be a conflict of views based on the same sort of evidence—that the Chancellor is budgeting for too large a surplus of income over expenditure at the present time. It is £433 million and this year the right hon. and learned Gentleman is to borrow less to make up his deficit than he borrowed last year. Last year, he borrowed £211 million. This year, he hopes to borrow only £74 million. If he had been content to do the same as he did last year, he could have avoided a great many of the difficulties which have afflicted industry and afflicted wage earners particularly in the public and semi-public services.
Our industrial production today is only 13 per cent. higher than it was in 1958. Last July it was 16 per cent. higher. There has been a decline since last summer. A selective release of taxation would, in my view, have increased purchasing power and stimulated industry. A higher level of activity in industry—there can be no quarrel about this on either side—would have a beneficial effect in lowering costs. Moreover, a less severe Budget would have enabled the Chancellor to meet the claims of groups of people who are ill


rewarded by the Government for their services, such as the nurses and the probation officers.
A trained nurse, man or woman, receives £10, rising to £12 10s. a week, and a ward sister receives £12 10s. to £16 a week. They have been offered a 2½per cent. increase. There is no doubt that the hand of the Treasury has limited the increase to 2½per cent. The cost of that would be £4 million, and that will not wholly fall upon the central Government; part falls upon the local authorities. If the Chancellor had followed the same course as he followed last year in relation to borrowing, he could have satisfied the nurses, and, what is more, satisfied public opinion about the outrageous deal which the nurses are getting today.
The probation officers are another example. There are only 2,000 probation officers. I agree very much with what my hon. Friend the Member for Grimsby said about this. There are these margins of expenditure which are really slight, and, because the Chancellor feels that he must grind down all the time in these matters, there are real scandals in the country today. The position of probation officers is one example. They are a small group, fewer than 2,000. A probation officer receives £12 a week or thereabouts, rising to £16 or £17. That is all. An independent committee has recommended an increase of 20 per cent. to 30 per cent. in their remuneration because the service is collapsing. We know that a television actor is to be paid £160 a performance for playing the part on the screen—that was the last agreement which was made—yet we cannot pay the real probation officer properly for the work which he does.
I say to the Chancellor in all sincerity—I should not say it unless I believed that the figures bore it out—that he miscalculated the budgetary position. Our economy is not in such a desperate state that he is forced to economise on public servants in the way he has done. Of course, if the Chancellor gives less this year, he has more to give next year. There is a great deal of thinking along these lines and its influence is at work—"We can save it up this year and do more in the Budget before the election".
The next test I apply to this Finance Bill is: does it correct the Government's undoubted bias against the P.A.Y.E. taxpayer earning up to £1,500 a year, and does it correct the Government's bias, in particular, against the small income groups earning up to £8 or £9 a week? The answer on both counts is that it does not. The only thing that one can find is in Clause 8 which proposes reliefs for small incomes and for old people, a small concession raising the exemption limit to £300 for a single person and £480 for a married couple. I welcome and applaud it as far as it goes.
The cost of this concession will be £500,000 this year and in a full year it will be £2 million. When we think of the good it will do, is there any single hon. Member opposite who believes that it should not have been done before some of the other reliefs which have been given during the past few years? Why do we always, year after year, have to press for these concessions and move Amendments Which are rejected and rebuffed toy right hon. and hon. Gentlemen opposite, only to find that, in the fallowing year or in two or three years, they bring forward the same proposals? Of course, it depends to some extent on when the election is. But we shall give the party opposite another opportunity this year, and do it on the basis of the budgetary situation as it stands. There will be opportunities for hon. Members opposite to show how much they care about the bias which undoubtedly exists against the small income groups, because we shall table Amendments Which will enable them to put their convictions to the test and to come into the Lobby with us if they wish to do so.
As I have said before, it is well known that the increase in reliefs has not kept pace with the increase in incomes. My hon. Friend the Member for Craigton demonstrated this. In 1955, there were 4 million people at the bottom of the income scale who were exempted from taxation. Today, there are only 2 million such people, because the increase in reliefs has not kept pace with the increase in incomes, although we all know how the cost of living has gone up for these groups of people.
Let me now deal with a single person I wish to get these examples on the


record, because it is important that we should drive home to people the effect of the Government's budgetary policy over the last few years. Let me take the instance of a single person earning £7 15s. a week who, perhaps, is living at home or in lodgings. In any case, £7 15s. a week is not very much these days. At present, he pays over 11s. a week in taxation and, if he is not exempted from paying it, he makes a National Insurance contribution of 10s. 7d. On that income, a man or young girl, perhaps, living in lodgings pays 21s. 7d. in tax.
In 1955–56—this is what I want to impress on hon. Members opposite because they can influence the Chancellor of the Exchequer even if I cannot—a person earning £7 15s. a week, living in lodgings or at home, was paying 12s. 8d. in Income Tax and 6s. 9d. in National Insurance, a total of 19s. 5d. a week.

Mr. A. Lewis: How much rent?

Mr. Callaghan: Obviously, my hon. Friend means that rent and the cost of board and lodging have increased since then, and we all know that. But I stick rigidly to the taxation burden, because what hon. Members opposite have connived at and supported over the last few years is shovelling the burden of taxation on to the shoulders of those who can least afford to bear it. The sooner we wake up to that, the sooner we stand a chance to put it right.
Let me now deal with a provincial bus driver. Do hon. Members know what is his maximum wage without overtime—£10 3s. 6d. a week? A married man with one child under 11 years of age on a maximum, not minimum, wage of £10 3s. 6d. a week was paying in 1956 in Income Tax and National Insurance combined approximately 10s. a week. Today, in Income Tax and National Insurance he is paying 14s. 4d. a week, an increase of 4s. 4d. in his tax burden on a wage of £10 3s. 6d. It is disgraceful that we should have allowed this to happen. Over the same period, a man with an income of £4,000 a year in the same circumstances has become nearly £600 a year better off. How can we justify this?
I could multiply these examples in-

definitely, but I will not weary the House by so doing. We know that, in addition, rents have increased. Under this Budget, Purchase Tax is going up on boots, shoes, furniture, and even on sweets. One hon. Member opposite told us that the Budget was keeping the cost of living stable. I wonder what sort of world he lives in if he believes that. It does not keep the cost of living stable. It puts it up, especially for the people in the groups to which I have been referring. We intend to table a series of Amendments which will focus attention on these groups and which will ensure that they get a fair crack of the whip in the debates during the Committee stage of the Bill.
If the Chancellor of the Exchequer had the will, he had two opportunities to correct this bias which has been deliberately induced by the policies of his predecessors. First, he could, even within the existing limits of taxation and the amount which he collects, redress the balance. He knows as well as or even better than I know, that he could ease the taxation burden even within the level of revenue which he is raising now. He could have done that on the Surtax reliefs. In the light of what I have said, I wonder whether the Leader of the House still believes that the idea of equality awakens no answering chord on that side of the House. If it does not, it should do so.
Apart from redistribution, which the Chancellor of the Exchequer does not choose to do because hon. Members opposite believe in inequality and in these vast disparities, he had another chance this year with his capital gains tax. He could have introduced a real capital gains tax which would have raised a sufficient amount of revenue from uncovenanted benefits to enable this redistribution to take place in favour of the lower paid.
Clauses 9 to 17 are a sheer mockery. They do not deal with a capital gains tax. These Clauses are so trifling that I expect that the Attorney-General will spend his whole time explaining them. He knows, as well as I do, that they will catch an infinitesimal number of transactions and raise a minimal amount of taxation revenue. I forecast that 95 per cent. of the capital gains accruing in this country will escape Clauses 9 to 17, and


I imagine that that is why many of my hon. Friends will feel ill-disposed to spend their time on such a ridiculous charade and imitation of a capital gains tax as what is put forward here appears to be.
Commercial gains are escaping taxation. I hope that the Chancellor will take this point. They are commercial gains which are escaping taxation because they occur in the form of capital appreciation. I cannot understand the logic or the philosophy of it. As my hon. Friend the Member for Sowerby said, the man who has to work overtime, and put in a long working week under perhaps unpleasant conditions, has to pay tax on his additional earnings. Why should not a man or a woman who gets an uncovenanted capital gain—perhaps through a commercial transaction—not pay tax on it? I have no hesitation in saying that it is a matter of social justice that a tax should be imposed on an increasing number of transactions of this nature that are escaping taxation in this way.
It may be that there are two things that we could do. We could redistribute the burden of taxation to help those I have been speaking about, and I believe that the volume of taxation would be such that, with a properly constituted tax, it would be possible to get a tolerable rate of Income Tax on some of the taxation at the top which is now believed to be excessive and burdensome. I believe that both these things could be achieved. The tax itself will raise no revenue. It will not satisfy workers who are being asked to give up pay increases; and this is supposed to be the quid pro quo for it.
The Bill is full of pinpricks. It hurts no one really, but it pricks a lot of people in what it sets out to do. Perhaps the gilt-edged jobbers are the people who will suffer most, because I understand that according to the memorandum, which I have not had the good fortune to see but which the Chancellor has received from them, they cannot survive if this tax goes on in its present form. What a state the Chancellor has reduced the gilt-edged market to if the only way in which the gilt-edged jobbers can make a living is by short-term speculation of

this sort, in and out, to make a tax-free living.
That is what they are saying. It is the whole basis of their case. They say, "Unless this is regarded as being tax-free we cannot make a living." I feel very sorry for the jobbers in the gilt-edged market. I suggest that the Government put gilt-edged back where it should be and give a reasonable rate of interest to do so.
The next test to apply to the Finance Bill is whether it helps industry to be more efficient, more enterprising and to export more. [Interruption.] The right hon. Member for Flint, West is a past master at the art of being offensive. [An HON. MEMBER: "He is very good."] He is so good at it that I wonder why he was such a flop when he was at the Dispatch Box. Some of us remember his performances when Secretary of State for Air. We wonder how he can now tell Ministers how to do their job. Some hon. Members were not then in the House and do not remember the right hon. Gentleman's performances, but I do.
There is nothing in the Finance Bill, except Clause 17, which can in any way be construed as helping industry. Clause 17 will help it a little. The hon. Member for Yardley made the point, fairly and accurately, that unless the Finance Bill does something to assist industry to secure growth it cannot be regarded as fitting or appropriate to the circumstances of today.
Our aim on this side—we shall try to frame new Clauses and Amendments accordingly—is to assist industry by pursuing and promoting a policy of steady growth. We shall also try not only to assist industry, but to assist the country by ensuring the planned dispersal of industry. These matters concern manufacturers and industry closely.
We would like help by way of additional allowances to be given to assist exports. We would like to assist by way of tax reliefs and even more dispersal of industry. We should like to assist firms who employ apprentices by giving reliefs in respect of the expenditure which they incur in this connection. We shall move a number of Amendments on these lines as well as to increase the relief to the P.A.Y.E. taxpayers.
I have listened to almost the whole of this debate, having been present for nearly every speech. I cannot say that it has been an exciting occasion. [HON. MEMBER: "Hear, hear."] There is not much to be excited about in the Bill. I feel more able to make such a judgment, having been present, than some of those who are now cheering.
The fact that this has been such a depressing occasion is in itself a reflection on the Finance Bill and its contents. For that reason we shall have a series of dull debates in Committee on irrelevant issues until we come to the new Clauses that we shall be able to put down that will try to focus attention on what the country is talking about.
Hon. Members opposite can be arrogant and superior, but they will not find that that pays them when they face the electorate in its present mood. I warn hon. Members opposite that, offensive and rude as they can be here, it will serve them ill when they get outside this House. We can take it here, but they will have to pay for it when they face the electorate.

9.43 p.m.

The Attorney-General (Sir Reginald Manningham-Buller): The hon. Member for Cardiff, South-East (Mr. Callaghan) said more than once in the course of his speech that he had found it a depressing day. I am sorry about that.

Mr. C. Pannell: It could be even worse now.

The Attorney-General: Yes, it could be even worse now. I did not find it a depressing day, even when listening to the speech of the hon. Member for Leeds, West (Mr. C. Pannell).

Mr. Pannell: I do not suppose that the right hon. and learned Gentleman understood it.

The Attorney-General: I have heard most of the speeches made during the debate; they were wide ranging and interesting. The only depression from which I have suffered has been in the last half hour from a party political speech.

Mr. Pannell: What is this place for?

The Attorney-General: That is a very limited view. The purpose of today's

debate is to discuss the Second Reading of the Finance Bill. I do not think that the hon. Member for Leeds, West in the course of his speech, mentioned it at all. I leave that, however, because I shall come to his speech presently.
I shall not seek to cover all the ground that the hon. Member for Cardiff, South-East covered during his speech. It has been a debate very largely on economic affairs and very much a continuation of the Budget debate.
It is not necessary I think this evening for me after my right hon. Friend's exhaustive and lucid survey of the provisions of the Bill to deal with them in any detail now, although I confess I found it rather ominous when my right hon. Friend began by saying that I would be ready to answer any question on any single phrase in the Bill at the end of the debate. I must confess to one disappointment, although it did not depress me. It is that we have had in the course of this widely ranging debate on the Second Reading of this important Measure not a single contribution from a Member of the Liberal Party.

Mr. Thorpe: Get on with it.

The Attorney-General: It would be interesting indeed to know whether the Liberal Party had any contribution to make to our economic situation. [HON. MEMBER: "None."] I think that the answer is none. They only like to be here to interrupt other people's speeches and not make speeches of their own.
The hon. Member for Sowerby (Mr Houghton) began his speech by making a reference to the White Paper. He welcomed it, and I think that the whole House has no doubt found it useful. The hon. Member hoped that it would be followed in connection with every other Finance Bill. I daresay that many share that hope, but he will appreciate the great difficulty involved in preparing a White Paper covering the whole of the Finance Bill, keeping it in line with the Bill and getting both into print at the same time, with the Clauses in the right order as well.
The task of the House in considering this Measure when it comes to the detail of it in Committee will be considerably assisted by having that White Paper as a guide to the interpretation of some involved legal language which one finds


in particular passages, but I cannot think that it would be a good thing to try to adopt that practice except when one is making a major change, like the introduction of the new tax in Case VII of Schedule D.
I hope that the hon. Member for Cardiff, South-East will pay a little more attention to that White Paper. It would be helpful to him. He sought to suggest that gilt-edged jobbers were concerned because the provisions of the Bill would deprive them of a tax-free income. But they are taxed already, because they are carrying on a professional vocation under Case I of Schedule D.
The hon. Member for Sowerby referred to the regulators. I listened to what he had to say about them with interest. I am sure he will recognise that my right hon. and learned Friend, if he is making a Budget change, has to consider the whole field and he should not be debarred from including in his Budget proposals something which has been the subject of a regulatory change, because if that principle were acceded the more changes made by the introduction of regulators the less would be the field for change in the Budget. The importance of the Budget would be depreciated and the importance of the regulator appreciated, and that would affect considerably our constitutional practice.
Case VII has never set out to be a capital gains tax. We on this side of the House are against a capital gains tax. We do not think it right to put on a tax to deter investment or growth. We are seeking slightly to shift the line between capital and income so as to secure that receipts which people ordinarily regard as income receipts are brought into tax when at present they are not. Receipts which should be brought into tax under Case I of Schedule D, where there is a trade or adventure in the nature of a trade, are escaping tax at the present time, because it may be asserted—and it is difficult for the Inland Revenue to establish the contrary—that the person who has gained the receipts is not engaged in a trade or an adventure in the nature of a trade or profession or vocation. That is the narrow line, and one gets, of course, a

good deal of dressing up here to avoid its being established that there is a trade or vocation being carried on.
We believe that it is right to shift the line between the definitions of a capital receipt and an income receipt slightly so as to eliminate that distinction. We believe that it is right that those who make speculative profits of that kind should be liable to tax upon those profits. I emphasise that it is not a capital gains tax and it will certainly save the time of the House in Committee if it is appreciated that it was never intended to be one.

Mr. Callaghan: Will the right hon. and learned Gentleman expand his view as to why a commercial transaction which results in a capital gain should not attract tax?

The Attorney-General: I could expand my view. If it is a speculative transaction, as opposed to a transaction of an investment character, I think that it should attract tax, as we are seeking to do, but we do not want to deter thrift or investment. It is a question of where we draw the line between the two. The line we have drawn is based on a time factor. I do not want to take up time going into that, but we think that we have chosen the right time factors for the different kinds of transacton.
I want to say something about two matters. One is the question raised by my hon. Friend the Member for Nottingham, West (Mr. Tapsell) about mutual insurance companies. The tax on insurance companies is a most complicated subject, as I am sure that the hon. Member for Sowerby will agree, and the treatment differs as between proprietary companies and mutual companies. I shall deal first with the case of the proprietary companies.
I am sure that the provisions of the Bill will have no effect, save in a few exceptional cases, on the liability of such companies in relation to gains from short term dealings in securities. The simple reason is that, in Clause 9, the new charge does not apply to gains which occur as profits of a trade, and this would normally apply to gains by proprietary companies. In such cases, such short term gains already fall to be


taken into account in computing profits under Case I of Schedule D.
In proprietary life companies, liability is normally assessed on investment income allowing for management expenses. This basis gives a higher liability than alternative Case I statutory charge on profits. That does not affect the position that gains accrue as profits of the trade.
The tax of the mutual companies is less simple. I am reading my notes here because I want to get through this as quickly as I can in order to get it on the record for the House to have available. There is the well known principle that people cannot make profits out of trading with themselves, and mutual companies have been regarded as not being liable to tax on trade profits. The Radcliffe Commission thought that this position was wrong and that they should be made liable, though this recommendation has not yet been carried out. On the basis of the present treatment, therefore, short term gains of mutual insurance companies are within the new charge under Case VII. In the case of non life business I do not at present see any reason to think that that would be a wrong result since if members themselves carried out such short term transactions giving rise to gains, they would be liable.
As regards mutual life companies, although there is no tax on trading profits, there is tax liability on what I have described as the alternative basis of investment income less management expenses. In this case, there is clearly a question for consideration, and as my right hon. Friend has said, we received anal representations from the life Offices Association on this matter, and it proposes to send a written statement of its view.
This is a most complicated matter, but I can assure the House that between now and the Committee stage we shall give very careful consideration to everything said on this topic. There is one other topic with which I should like to deal and which was raised by my hon. Friend the Member for Gainsborough (Mr. Kimball). He asked a question about Clause 23. I know that there is concern in and outside the House about the application of Estate Duty to immovable property outside

this country held, it may be, for many years and, may be, owned by a family for more than one generation. It is true, and I recognise the fact, that ever since Estate Duty started, in 1894, land and other immovable property abroad has been exempt from being brought into account when calculating the value of an estate which passes on death.
But in recent years many countries have brought land abroad within their death duties, and, indeed, it is not easy to see any logical reason for treating movable property abroad, which has always been brought into account, differently from immovable. Any extension of the scope of Estate Duty is, as I know, most unwelcome to many people in this country, but I am sure that they would agree that my right hon. and learned Friend would be failing in his duty if he did not in this Finance Bill deal with a situation which is becoming, if it has not already become, a scandal.
This exemption of immovable property overseas has in recent years been used and used to an increasing degree solely for the purpose of escaping Estate Duty. There is one case on record of a very old lady who invested nearly £1 million in land abroad a week before she died. That escaped Estate Duty. Advertisements have been appearing in The Times and other reputable newspapers. Some time ago The Times carried an advertisement which read:
Death Duty
We will solve your problem within 48 hours. See Bahamas Property announcement back page.
The announcement on the back page was headed:
Reduce United Kingdom Estate Duty by buying Nassau (Bahamas) leasehold property.
and pointed out that land abroad was exempt from U.K. Estate Duty.
Investment in mortgages in Jersey, to which my hon. Friend the Member for Gainsborough referred, has also been widely advertised as a means of avoiding Estate Duty. There is, or was until last week, a statutory limit on the rate of interest chargeable in Jersey which made these mortgages unattractive if considered solely as an investment. Yet in the first three months of this year investment by British residents in Jersey mortgages was running at the rate of £5


million a year. I am sure the House will agree that my right hon. and learned Friend had no alternative but to seek to plug this leak.

Mr. Hirst: Certainly not

The Attorney-General: What I know is felt—and this is the view which was expressed by my hon. Friend the Member for Gainsborough—is that if possible some way should be found to stop this tax evasion without at the same time bringing into the Estate Duty net land abroad acquired it may be many years ago and it may be without any thought of tax avoidance. I can assure the House that very careful consideration has been given to this. It has been suggested that the charge to Estate Duty ought not to apply to land abroad which was acquired before the Budget. My first comment on that is that if that proposal were adopted the deliberate tax avoiders would benefit as well as innocent investors.
Some people have argued that if land acquired before the Budget is brought in it is retrospective legislation. That is not so. Estate Duty is levied on and has always been levied on the property passing on death. If my right hon. and learned Friend had sought to provide that the value of land overseas should be brought into account in the valuation of an estate passing on a death occurring before the Budget, then it would be right to stigmatise it as a retrospective tax, but he has done nothing of the sort. Estate Duty is not concerned with the. date of acquisition of property by the deceased, but only with what passes on his death. Clause 23 begins by saying that land abroad shall be brought into charge
In the case of persons dying after the commencement of this Act …
Almost identical words are to be found in the 1894 Act, and there was then no exemption for property acquired before Sir William Harcourt introduced his Budget. Ever since 1894 the principle has remained the same, the general principle that Estate Duty is levied on property passing on death irrespective of the date of acquisition of that property. There have been one or two exceptions, but there have always been special reasons for those and they do not really apply in this case.
It is claimed that any person who enters a transaction should be entitled to have the Estate Duty law frozen for his benefit as it stood at the time of the transaction. That, I think, is a startling proposition, and I find it difficult to believe tht anyone entering into such transactions really expected that to be the case. Nor do I think it would be reasonable for them to have expected it to be. I am sure that their qualified advisers would warn them of the possibility that the law might be changed.
I know of one wise solicitor who for several years has advised clients not to purchase immovable property abroad to avoid Estate Duty because he felt that the time would come when the loophole would be stopped. I do not feel that a case can be made out for exemption from such legislation on the ground that they got in first and bought when Estate Duty was not leviable. I was asked whether the ordinary agricultural relief would be available in relation to such land. The answer is "Yes". I hope that hon. Members who are concerned about this and others who bought or inherited land years ago appreciate the benefit of getting the unilateral relief which applies not only to immovable property but also to movable property overseas.
I must refer to one matter which is not at present dealt with in the Bill. The House will recollect that in 1960 we revised the penalty code in relation to defaulting taxpayers. Hon. Members may recollect that in the Hinchy case, the power of the Revenue to sue for £20 and three times the total amount of tax which the taxpayer ought to have paid on his whole income was much criticised. In the Finance Act of that year we repealed a large number of the old penalty provisions and introduced a new code, fairer to the defaulting taxpayer. Provision was made for the assessment of the tax owed, and for charging simple interest and the imposition of penalties which were lower than those previously prescribed. The provisions were welcomed by hon. Members on both sides of the House, and it was the intention that they should be retrospective because that would favour the taxpayer.
It was intended that the new code should apply to all outstanding cases, whether or not the default preceded


the passage of the 1960 Act. Where penalty proceedings had already been instituted under the old code they were not to be affected, but in all other cases the new code was to apply. Since my right hon. and learned Friend introduced his Budget, there has been a decision in the Divisional Court to the effect that the language of the 1960 Act was not fully effective to make the new code apply in relation to taxpayers who defaulted before the passage of that Act.
The particular decision was on the power to charge simple interest at 3 per cent., but in fact the judgment has wide implications and—and I particularly draw the attention of the House to this—it maybe leaves the taxpayer whose error was committed prior to the passing of the 1960 Act still liable to the old penalties which were so much criticised in the Hinchy case.
It may be that on appeal the decision of the Divisional Court would be reversed, but some time would elapse and my right hon. Friend, having carefully considered the position, has come to the conclusion that the matter should not be left in doubt and that it should be dealt with in this Finance Bill. There is no doubt that it was the desire of Parliament in 1960 that the old, harsh penalty code should be got rid of entirely, and it was certainly intended that the new code should apply generally in relation to years both preceding and following 1960, except where penalty proceedings had already been instituted.
The new Clause which my right hon. and learned Friend will table in due course will be designed to secure that result beyond further question. I thought it right to give hon. Gentlemen opposite notice of that. I hope that when the time comes we shall have their support in carrying through that amendment as we did in carrying through the original penalty proposals.
I conclude by saying that the hon. Member for Cardiff, South-East commented on the lack of speeches directed to the content of this Bill. There is one conclusion which I think is to be drawn from that. It is that hon. Members, having had the advantage this year of a White Paper explaining what is intended by the speculative gains tax,

and in regard to the Case VII taxation, and having seen the other Clauses in the Bill, are satisfied with what it proposes and are satisfied that its proposals are in the best interests of the nation. [interruption.] The hon. Member for Devon, North (Mr. Thorpe) can speak in this House or electioneer outside, but that is the end of my speech.

Question put and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

Committee Tomorrow.

Orders of the Day — HOSPITALS (STAFF REDUNDANCY)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitelaw.]

10.6 p.m.

Mr. Carol Johnson: I welcome this opportunity of dealing with a number of important matters connected with the subject of redundancy arising from the proposed reorganisation of the hospital service. Obviously, in a short debate of this character it would be impossible to go into great detail. All I can do is to refer in general terms to the main doubts and genuine fears which now exist among those who may possibly be affected at some future date.
The Parliamentary Secretary to the Ministry of Health must know by now that the Hospital Plan for England and Wales has created anxiety among National Health Service staffs. It is a long-term plan, a plan on a great scale for hospital development. Paragraph 6 of the plan refers to the fact that it takes several years to plan and carry out such a development, and that it would hardly be worth while looking ahead for a period of less than ten years in terms of "starts", as the plan calls them, which means roughly fifteen years in terms of completions. It is clear, therefore, that the plan is not a mere programme of tidying up or of local reorganisation. On the contrary, it is a major plan of reorganisation on a national scale.
As the House is aware, it is contemplated by this plan that ultimately as many as 1,250 hospitals will be closed.


In those circumstances, although there will, of course, at the same time be a great deal of rebuilding, it is obvious that it would not be possible to carry out such a major operation without there being a substantial impact on the staff employed.
This point is recognised in the plan itself, for in paragraph 51 it says that the staffing of the new hospital service must be the subject of a whole series of studies, commencing with a review of medical hospital staffing. However, so far as I am aware, none of this series of studies has been begun, nor has even preliminary planning for them begun. There is, therefore—I think understandably so—uncertainty about the future; and it is this uncertainty which is the cause of the anxiety to which I have referred. It is true that the Permanent Secretary to the Ministry quite recently said that he believed there would be no serious redundancy, but it is well to remember that any redundancy would not occur this year, or next year, and may, indeed, not occur until after the lapse of ten years. What can be said with reasonable certainty is that the prospect of redundancy cannot be ruled out.
I am sure that all the staffs likely to be affected by reorganisation would prefer to remain in the hospital service, and all the staff organisations would, I am sure, be willing to co-operate to the full in reducing to the minimum the risk of redundancy, but the measures which have so far been announced by the Ministry of Health for dealing with the re-deployment of staff seem to be inadequate, and something much more specific and much wider in scope is required.
For instance, is it unreasonable to suggest that if staffs cannot be found suitable alternative employment within their own employing authority regional hospital boards should be made responsible for placing such staff in alternative employment where this is available? Again, in those many cases which will undoubtedly arise where alternative employment, though not available in the same area, would be available in another regional board area, ought not it to be the Minister's clear responsibility to see that redundant staff are placed in such employment?
At present, there is no satisfactory liaison machinery whereby persons to be declared redundant in one area can be placed in another, and I strongly urge on the Parliamentary Secretary that her right hon. Friend should proceed to establish some such machinery forthwith. This would involve the creation of a central register of some sort under the control of a body which I suggest should include representatives both of the staffs and the employing bodies. I hope that this suggestion will be borne in mind when the staffing studies to which I have referred are under way, because, unless some such machinery as this is set up in consultation with the staff organisations the fear of redundancy will undoubtedly remain.
There is a second and even greater cause of anxiety. It is the absence so far of a satisfactory compensation scheme to cover any persons who might become redundant. The compensation proposals which the Minister has published are unsatisfactory, inadequate, and quite unsuitable for the circumstances with which they will have to deal. They can be justified neither on grounds of logic nor equity and should be withdrawn without further delay.
The whole basis of the compensation proposals of the Minister is misleading, because in the circular which contains them it claims to deal with redundancy
in consequence of organisational changes made by their employing authority.
But is it not clear from all that I have said that the scheme is, in fact, related to the hospital reorganisation scheme, known as the Ten Year Plan? If it is to deal with redundancy on a national scale it needs to be completely recast.
The Minister misled the House—I have no doubt quite unwittingly—when, in reply to a supplementary question by my hon. Friend the Member for St. Pancras, North (Mr. K. Robinson) on 5th March, he said that the scheme to which I have referred had been discussed with representatives of the staff, and added:
… I am not aware that there is any—certainly no substantial—disagreement."—[OFFICIAL REPORT, 5th March, 1962; Vol. 655, c. 15.]
In fact, both the Minister and the Parliamentary Secretary must know that representatives of the staffs have expressed


their complete dissatisfaction with the proposed arrangements.
Time will not allow me to deal at length with what a revised scheme ought to provide, but I should like to refer the Parliamentary Secretary to the Regulations which were made in 1948—the National Health Service (Transfer of Officers and Compensation) Regulations—under which compensation became payable to persons who suffered loss of employment or diminution of emoluments arising from the passing of the original National Health Service Act. It is significant that those Regulations remained in force for ten years, which is the same period as is contemplated by the new hospital plan.
Moreover, after the Regulations had expired the Minister made use of powers which he had under the 1946 Act to make provision for transfer and compensation of officers on reorganisation of areas and other matters. It was anticipated by staffs in the service that that process would continue for the future. I should like the Parliamentary Secretary to explain why that could not be done.
The Minister has substituted instead proposals which can only be described as paltry. Though there is provision for terminal gratuities, as there was under the 1948 Regulations, there is no provision for long-term compensation, nor for loss of pension rights as has hitherto been the case.
There is much more that could be and ought to be said on this matter, but I want, in conclusion, to ask the hon. Lady the Parliamentary Secretary to give, on behalf of the Minister, a firm assurance that everything possible will be done to avoid redundancy and that the Minister will establish suitable liaison machinery for the placing of redundant staff. I hope that, in addition, she will prevail upon her right hon. Friend, for all the reasons which I have given, to withdraw the proposals that have been so much criticised and, in consultation with the staff organisations, devise a better and fairer scheme which will bring these public servants into line with schemes of compensation in local government and the reorganisation of the water industry.
Otherwise, the Minister will create the impression that he is less zealous for the

interests of the public servants for whom he is ultimately responsible than his colleagues in other fields.

10.17 p.m.

Mr. Kenneth Robinson: I will take up only a few minutes of the hon. Lady's time merely to underline one or two of the points which have been made so cogently by my hon. Friend the Member for Lewis-ham, South (Mr. C. Johnson). Like him and, I am sure, the whole House, I hope that little redundancy will result from the operation of this hospital plan. I believe that there will not be a great deal, but it would be foolish not to recognise that there is considerable anxiety at the moment among hospital staffs.
In view of that, I can only describe these redundancy proposals of the Minister as mean and unsatisfactory. The first question I want to ask the hon. Lady is what excuse there was for introducing redundancy terms which are far less favourable than the terms introduced by the Labour Government in 1948, which were in operation until two or three years ago. This was essentially a case to be negotiated and agreed with the representatives of hospital staffs, more particularly in the light of the present loss of confidence in the Whitley Councils, which derives very largely from ministerial interference in their work.
Instead of going to the Whitley Councils and thrashing out an agreement, the Minister heard the views of the staff side and then proceeded very largely to ignore them and issue his circular as an ipse dixit. I suggest that the proper thing for the Minister to do now, is as my hon. Friend said, to withdraw the circular and reopen genuine Whitley Council negotiations with staff representatives.
Finally, I want to refer to the Minister's absence tonight. We are all aware that, normally, the Parliamentary Secretary answers Adjournment debates on health quesions. She always does it very agreeably, if not entirely to the satisfaction of my hon. Friends on all occasions. However, this is a rather special instance, because the Minister's good faith has been called into question on this matter, arising out of the reply he gave to a supplementary question of mine on 5th March, when he said that


there was no substantial disagreement with staff representatives over these redundancy terms.
This is just not true. I have no doubt that the Minister had no wish to mislead the House, but, he did mislead the House. He had the opportunity about a week later, on another Question from my hon. Friend the Member for Greenock (Dr. Dickson Mabon), to put it right, and he failed to do so. Now that the matter has been brought up by my hon. Friend tonight, I am both surprised and disappointed that the Minister did not come here to explain his position personally and to offer an apology to the House, and, indeed, to the staff side of the Whitley Council. I hope that at least we shall have an apology by proxy on the Minister's behalf from the Parliamentary Secretary.

10.21 p.m.

The Parliamentary Secretary to the Ministry of Health (Miss Edith Pitt): I know, as the hon. Member for Lewisham, South (Mr. C. Johnson) suggested, that some staffs have been anxious about the possible effect of the hospital plan on their careers, and therefore, with him, I welcome this debate, in order, I hope, that the outcome of it may be to remove some of the uncertainties to which he referred.
I should like to make it clear at once that, While in due course the plan may involve considerable redeployment of staff, we expect that it will be rare for difficulties to arise in finding posts elsewhere in the Service for those who want them, and I am glad to have the support of the hon. Member for St. Pancras, North (Mr. K. Robinson) in that statement. There is no question of a sudden or dramatic change. Implementation of the plan will be a gradual process over a long period of years, with ample time for providing for the future of the staffs affected by the changes that are brought about. The detailed arrangements are set out in a Memorandum (HM (62) 12), of which both hon. Members said they had copies, published on 8th March.
This scheme covered non-ancillary staff, and was supplementary to the one published in June, 1960, for ancillary, that is, domestic and manual, staff. It

provides for staff who are displaced by any kind of administrative reorganisation, including developments under the hospital plan. Much the most important part of these arrangements is the provision made to help displaced staff to secure other Health Service employment. We in the Ministry fully share the concern of the staff interests that redundancy, in the sense of the loss to the Health Service of the services of experienced staff, ought to be avoided to the fullest possible extent. We have asked all authorities to co-operate to this end.
Often the staff will be found alternative employment by their own authorities. Often again, where a hospital is to be closed, the closure will be dependent on the building of a new hospital or the enlargement of an existing hospital, and it will generally be possible to transfer the staff with the work. For the rest, we have arranged for planned consultations to take place between different authorities, and for regional hospital boards to co-ordinate the exchange of information between different authorities where appropriate, and have asked that all authorities should give priority to suitable displaced officers in the filling of vacancies.
Given the ample time that there will be for advanced planning, we are confident that these arrangements will mean that very few staff who want to retain their Health Service employment will not succeed in doing so. For certain staff, assistance with extra travelling expenses for a time or removal expenses will, if necessary, be provided.
One very important feature of the arrangements is the need to let the staff know exactly what is happening, and that, I appreciate, is of great personal importance, and the need to let them know what plans are being made to help them. We have asked all the hospital authorities to bring their staffs into the picture at the earliest possible moment, at the stage at which changes are taking place in their own hospital which will affect them, and we have even indicated in the memorandum that, where the event may be some years ahead, an indication should be given.
It must, nevertheless, be recognised that there are bound to be a few staff for whom other employment cannot be


found within the Health Service. Special difficulty can, for example, arise in replacing staff nearing the age of 60 who are unable to claim pension on retirement before that age. My right hon. Friend proposes, subject to the agreement of both Houses of Parliament, to make regulations which will enable such staff, with at least ten years service, to retire on pension if they are over 55 years of age.
For the younger staff, with at least five years' service, who have not been able to find other Health Service employment, the scheme provides, subject to certain conditions, for terminal payments at a rate of two-thirds of the weekly salary for a period of weeks corresponding to their years of service, up to 26 weeks. The terminal payments are intended to help such officers over the period when they may be seeking other employment, and even during this period we expect their employing authority to continue its efforts to find other employment for them. That, again, is mentioned specifically in the memorandum.
The hon. Member for Lewisham, South—and, indeed, the hon. Member for St. Pancras, North—criticised the scheme now put forward on the grounds that it is not as generous as the scheme for compensating officers displaced when the Health Service was introduced in 1948, or that contemplated for staffs who are likely to be displaced by the reorganisation of local government or the water industry. I would point out that the compensation provisions for Health Service staffs made when the Service was introduced in 1948 were on the scale thought appropriate for redundancies created by a major reorganisation brought about directly as a result of legislative action.
That is not the situation with which we are faced here. There is no question now of a major statutory reorganisation taking place all over on a single day. What the plan involves are developments that will take effect gradually over a long period in the natural process of administrative reorganisations to be expected in any large and vital service. For any redundancies that arise in this way, our provisions accord with those considered appropriate for redundancies arising in

the same way in other parts of the public service.
On this general question of redundancy, I should like to make it quite clear that any large scale redundancy is, on the face of it, extremely unlikely. I would ask those hon. Members who are interested enough in the subject to stay for this debate to take any grade they like, count how many officers there are in it, make a guess about the new reduction in the number of posts in that grade which is likely to come about over the next ten or fifteen years. That represents the potential redundancy among that grade.
Now see how many of those now in post are within ten or fifteen years of retirement, and guess how many of the others are likely to get higher jobs during that time. The result is the figure of vacancies into which the potential redundant staff can be absorbed. I doubt if it will often work out at less than the first figure. I see that I carry with me the hon. Member for Greenwich (Mr. Marsh). It is often likely to be several times as big. I realise, of course, that this over-simplifies the matter, because vacancies will not always arise just when they are needed, and posts in the same grade are not all paid the same. But, prima facie, the problem will be far from unmanageable.
On the question of representation, I should like to say that the redundancy scheme was fully discussed with the staff side at two meetings between officials of our Department and representatives of the staff interests. Both hon. Gentlemen have asked me to comment on the answer given by my right hon. Friend to a supplementary question put to him in the House, and the hon. Member for Lewisham, South said that my right hon. Friend had misled the House. I do not think that that is the case. Certainly, my right hon. Friend would not have wished to do so. On that occasion, he was making clear that the arrangements proposed under this scheme, so far as they went, were acceptable to the staff interests, and that was so. The staff interests accepted what we have proposed, but, of course, it is also true to go on from there and to say that the staff interests would like the arrangements to extend much further than they do now; and that is exactly


what my right hon. Friend was endeavouring to say in answer to the supplementary question which was put to him.

Mr. K. Robinson: Surely one point could not possibly come within the description which the hon. Lady has given. The difference is the question of the responsibility of regional hospital boards for finding jobs. This was not just a difference of degree, it was a difference of kind between the two sides at the discussion.

Miss Pitt: I will come to that point in a moment. In fact, it is my next point. I have to cut short my speech because, as the hon. Gentleman will realise, the time is short as I allowed him to make a contribution to this debate. However I am trying to give all the essential points.
The placing of redundant officers was referred to and the hon. Member suggested that if staff are redundant and cannot be found suitable alternative employment by their own employing authority, the regional hospital boards should be made directly responsible for placing them in other posts; and that where posts are available only in another regional board area, the Minister should assume responsibility. An exchange of information about vacancies is possible through regional hospital boards and through the Ministry of Labour and a large number of hospital vacancies are advertised in the Press and in the specialised journals, so redundant

staffs should have no trouble in discovering what vacancies are available.
As matters stand with the Health Service, the actual selection and appointment of staff is a matter for each employing authority, and it seemed to us that we could secure the desired result better by enlisting their voluntary co-operation as the present arrangements provide.
We appreciate that the scheme is not all that the staff associations would have liked. I can understand that the staff associations would have liked higher compensation for staff who cannot be absorbed. But having listened to and carefully considered their views, we did not feel able to go beyond what has been promulgated. As I have said, we are at one with them in wanting to obviate the need for compensation so far as possible and to retain the skill and experience of staff. We consider that the arrangements we have made should enable this to be done. In short, the right way to look at HM (62) 12 is that it is a scheme for avoiding redundancies and to this end the hospital authorities and the staff interests will alike be lending their best efforts, and they can count on the enthusiastic help of the Ministry.
The hon. Member for Lewisham, South concluded by asking for a firm assurance that steps would be taken to avoid redundancies and that I am most happy to give him.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes to Eleven o'clock.